EB Daily Market Report - Wednesday, December 21, 2022
Executive Market Summary
- Futures were strong overnight as solid earnings reactions to both Nike (NKE, +13.15%) and FedEx (FDX, +4.16%) paved the way for higher prices today
- Prices have strengthened across all of our major indices throughout today's session, resulting in another big drop in the Volatility Index ($VIX, -4.98%), which was sub-20 earlier
- November consumer confidence (108.3 vs. 101.0) was reported way above expectations this morning
- Gold ($GOLD, -0.17%) is struggling to clear overhead resistance at $1825 per ounce
- Crude oil prices ($WTIC, +2.95%) are surging, lifting energy (XLE, +2.06%) to the top of the sector leaderboard
- Industrials (XLI, +1.78%) and consumer discretionary (XLY, +1.65%) are also performing very well
- All 11 sectors are participating in today's rally
- Footwear ($DJUSFT, +12.00%) is soaring on the "heels" of NKE's earnings report
- NKE is the primary catalyst in the Dow Jones' 500 point rally today; only Walgreens Boots Alliance (WBA, -2.34%) is down among Dow components
Market Outlook
Today's action is promising so far as perhaps Santa Claus is finally coming to town. Helping to guide prices higher could be the 60-minute positive divergences that have just formed as prices hit lower lows. Check out this SPY chart:
I see the initial test coming at the 388-390 level as the PPO will likely reset as the 50-hour SMA and overhead price resistance is tested. A break above this range is what we really want to see, which could open up the door to a much larger yearend rally.
Sector/Industry Focus
For the first time in awhile, it appears as if money is rotating INTRADAY into riskier areas of the market. Check out this chart of the QQQ:SPY:
Breaking this downtrend is very important, because it at least APPEARS to be suggesting that more growth-oriented areas of the market could be favored into yearend. If you decide to take on more risk now, which is what I'm doing, consider backing off that approach if this ratio rolls back over and breaks to new recent lows.
ChartLists/Strategies
After downtrending for several sessions in a row, our major indices have printed a higher high today (vs. yesterday), suggesting that now might be a great time to scan for reversing stocks. Well, we've got that scan for you on our website. It's our Downtrend Reversal scan and if you run it against the Strong Earnings ChartList (SECL), it looks like this:
Just keep in mind that if you copy and paste this scan verbatim into your StockCharts account, it'll return ZERO matches. That's because ChartLists are uniquely identified in everyone's individual StockCharts account. So my SECL is showing as "favorites list is 155", but if you've downloaded the SECL into your account, it's very likely to have a different "favorites list #". You'll need to use the dropdown menu on the scanning page to select YOUR SECL ChartList, not mine. Hopefully, that makes sense. Anyhow, here are the results that I'm getting today, sorted in SCTR order to identify the best relative strength stocks first. In my opinion, these are likely to produce the best results in general:
Here are 3 worth pointing out:
CALX:
I realize CALX isn't having a huge day, but it's been a superb performer and it's printing a new high today after testing its 50-day SMA. I wouldn't be surprised if this begins a nice uptrend.
WING:
I've discussed this before, but I LOVE false breakdowns on leading stocks. WING hit its lowest level intraday since gapping higher back in October, but buyers are jumping all over it. WING was one of our setups from this past weekend (in the EB Weekly Portfolio Report).
NFLX:
NFLX is a stock in our Model Portfolio. Its reversal occurs off of yesterday's kick save at the rising 50-day SMA. A gap up tomorrow to leave the recent action on an "island" would be a bullish development and signal further upside ahead.
Earnings Reports
Here are the key earnings reports for the next two days, featuring stocks with market caps of more than $10 billion. I also include several companies with market caps below $10 billion. Finally, any portfolio stocks that will be reporting results are highlighted in BOLD. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning.
Wednesday, December 21:
MU, CTAS, TTC, CCL
Thursday, December 22:
PAYX, KMX
Economic Reports
November consumer confidence: 108.3 (actual) vs. 101.0 (estimate)
October existing home sales: 4,090,000 (actual) vs. 4,200,000 (estimate)
Happy trading!
Tom