EB Daily Market Report - Tuesday, January 10, 2023
Executive Market Summary
- Futures were lower overnight, though they did improve somewhat this morning
- After gapping slightly lower, our major indices have traded fairly close to the flat line throughout the day
- Sectors are mixed with communication services (XLC, +0.97%) and health care (XLV, +0.61%) showing leadership
- Meanwhile, utilities (XLU, -0.74%) are weak
- Commodities are mixed, with crude oil ($WTIC) higher by 1.35%
- Federal Reserve chatter has pointed mostly to what Fed officials have been saying all along - that this process of bringing down inflation will take time
- Renewable energy ($DWCREE, +4.15%) and aluminum ($DJUSAL, +3.41%) are among today's leading industry groups
Market Outlook
From a big picture perspective, the Dow Jones has a potential bottoming head & shoulders in play:
I like the upsloping neckline and shoulders, but it's going to take some work by the bulls to get this breakout. In the meantime, however, check out the recent low on the RSI at 40. That's at least an initial positive in terms of potentially seeing an uptrend develop. During new secular bull market advances, pullbacks typically will hold RSI 40. It's not confirmed just yet, but we are seeing signs developing.
Sector/Industry Focus
Clothing & accessories ($DJUSCF) has been improving for several weeks and there's a classic reverse head & shoulders bottom in play here IF it can continue to strengthen and clear overhead neckline resistance:
I'm a BIG fan of rising necklines and rising shoulders in a bottoming head & shoulders pattern and the DJUSCF shows both right now. Trading in some of the better relative strength stocks in this space makes a lot of sense to me, especially if you can set up the reward-to-risk favorably - perhaps a 3:1, 4:1, or higher ratio.
ChartLists/Strategies
Here are a couple interesting charts from the Strong Earnings ChartList (SECL):
SLB:
I like the breakout here. SLB is a leader in a leading industry.
CSGP:
It's a little late to pull the trigger on this one, but I wanted to point out the gap support test, because this is the type of trades I like to find from a risk-to-reward perspective.
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.
Tuesday, January 10:
ACI, SNX
Wednesday, January 11:
SJR, KBH
Economic Reports
November wholesale inventories: +1.0% (actual) vs. +1.0% (estimate)
Happy trading!
Tom