EB Daily Market Report - Thursday, February 9, 2023
Executive Market Summary
- Futures were higher overnight after several companies reported solid quarterly results during the after hours session
- Walt Disney Co. (DIS, +1.86%) was one of those companies and it gave the Dow Jones a lift at the opening bell
- All of our major indices have drifted into negative territory, however, as this period of consolidation continues
- Consumer discretionary (XLY, +0.71%) and technology (XLK, +0.53%) are hanging onto gains, but the other 9 sectors are lower, led by the overbought communications services group (XLC, -1.54%)
- Internet stocks ($DJUSNS, -3.89%) are the culprit for the underperforming XLC
- Commodities are mostly lower, including crude oil ($WTIC, -0.60%), which is down fractionally
- The 10-year treasury yield ($TNX) has been on the move higher throughout the day after gapping down 7 basis points; it's now higher by 2 basis points to 3.67%
- The Dow Jones is now down 125 points, as Walt Disney's earlier strength failed to trigger a significant rally
Market Outlook
We're seeing another day of mostly negative action INTRADAY. Solid earnings reports carried futures higher overnight and we did see gaps higher in many areas of the market. Walt Disney's (DIS) earnings report, in particular, saw a very positive market reaction at the opening bell. That strength, however, has dissipated. If we look again at the chart I provided yesterday of the S&P 500, you can see the potential cup has essentially disintegrated, but that short-term support is still holding:
The gap higher played right into that cup possibility, but the consistent selling throughout the day has broken the uptrend that I pointed out yesterday, with the next key support area from 4090-4100. We're basically there right now. For the second straight day, we'll see if any afternoon buying returns, so that we can hang onto this price support area.
Sector/Industry Focus
A long-term relative chart still shows that etherium ($ETHUSD) remains the better buy vs. bitcoin ($BTCUSD). 2016 and 2017 favored etherium in a very big way. The pendulum swung back towards bitcoin in 2018 and 2019. Since the beginning of 2020, however, I see a solid relative uptrend that favors etherium, although we've seen little relative strength on either side ofor the past 18-20 months:
I don't personally trade cryptos, but if I did, I'd clearly favor etherium - at least until the 0.055 relative support level was lost.
ChartLists/Strategies
Internet stocks have lost a lot of ground the past few days, mostly due to a very weak Alphabet (GOOGL). But is GOOGL unfairly bringing down a host of other better-performing internet stocks? Well, I scoured our ChartLists, looking specifically for internet stocks. Here was the scan I ran.....and the results returned:
Scan:
Results:
From this list, I have my eyes on two stocks in particular:
YEXT:
Volume trends here are very strong and any further weakness is likely to find buyers, especially as the rising 20-day EMA approaches. If I bought here, which is tempting, I'd still save some powder dry for a possible 20-day EMA test.
ZD:
ZD is another with excellent price-volume credentials and relative strength here has been solid for the past several months. Unlike the last price top, this one doesn't have a negative divergence. I see ZD breaking out fairly soon with that rising 20-day EMA acting as support.
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.
Thursday, February 9
ABBV, PEP, AZN, PM, SPGI, PYPL, DUK, BN, TRI, MSI, APO, DXCM, HLT, TU, MT, WTW, ARES, EQR, K, BAX, VRSN, VTR, WMG, NET, EXPE, IPG, KIM, MAS, NWS, CCJ, REG, BWA, CS, BAP, TPR, BRKR, HII, G, RL, SEE, MHK, ITT, DOCS, TPX, FAF, LYFT, MDU, THC, CYBR, QLYS, NSP, CBT, LITE, ONTO, AYX, TEX, SSTK, COUR, YELP, KN, SWI, TTGT, CGC
Friday, February 10
ENB, IQV, HMC, MTD, GPN, FTS, MGA, WPC, NWL, COOP, SPB
Economic Reports
Initial jobless claims: 196,000 (actual) vs. 192,000 (estimate)
Happy trading!
Tom