EB Daily Market Report - Wednesday, February 22, 2023

Tom Bowley - February 22, 2023

ChartList Updated

The Earnings AD ChartList (EADCL) will be updated on our site later today or early tomorrow morning. I feature a few stocks off of this ChartList below in the ChartLists/Strategies section.

Upcoming Vacation

I mentioned this a couple weeks ago, but I want to make sure everyone is aware. I'll be out of the country on vacation from March 3rd through March 10th. There will be no Trading Places Live shows during that period, although there will likely be earlier recordings replayed on StockCharts TV on Tuesday, March 7th and Thursday, March 9th. There will be no Daily Market Reports on Friday, March 3rd or the following week, but John Hopkins will provide everyone at least a brief market update each day. There will be no EB Weekly Portfolio Report on Sunday, March 5th, though I should be back in time to provide one on Sunday, March 12th.

My plan is to have all key ChartLists (SECL, SFECL, SADCL, RGCL, and BTCL) updated prior to leaving on March 3rd. It should be a fairly quiet period as few earnings will be out and there'll be no more Fed meetings until March 21-22. The jobs report will be out on Friday, March 3rd, so we could see a bit of fireworks that day, but otherwise it should be relatively quiet.

Executive Market Summary

Futures were slightly higher overnight and we saw a slight gap open this morning on our major indices
Commodities are mostly lower, including a 3% drop in crude oil prices ($WTIC) to $74 per barrel
Natural gas ($NATGAS) has surged 8.5% today, but that follows more than a 70% plunge over the past 3 months
The 10-year treasury yield ($TNX) is down 5 basis points to 3.90%, key yield resistance prior to yesterday's breakout; it seems as though traders are awaiting the FOMC minutes (out momentarily)
Materials (XLB, +1.09%) and consumer discretionary (XLY, +0.71%) are today's leading sectors
Real estate (XLRE, -0.13%) is the only sector in negative territory
Home construction ($DJUSHB, +1.67%) is seeing some relief with the TNX lower; also, Toll Brothers (TOL, +3.68%) is lifting the group after posting solid quarterly results
Keysight Technologies (KEYS, -13.46%) is the worst-performing S&P 500 after reporting disappointing quarterly results
The FOMC minutes were just released and showed no major surprises; the key takeaway is that Fed members remain vigilant vs. inflation - nothing new really
NVIDIA Corp (NVDA, +0.90%) reports their quarterly earnings after the bell today; NVDA is a leader in semiconductors ($DJUSSC, +0.13%) and carries significant influence in our major indices as well

Market Outlook

The relationship between growth and value is generally a rather important one as it helps signal to us whether market participants are in a "risk-on" mode (bullish) or "risk off" mode (bearish). There are several ratios that we can follow to keep us informed, but one that I like is the IWF:IWD, which tracks large-cap growth vs. large-cap value:

When the S&P 500 rallied in Q4, it did so with help from more value-oriented stocks. That also follows historical norms as both industrials (XLI) and financials (XLF) both have historically performed well in Q4. Once the calendar flipped to 2023, however, historical tendencies that favor NASDAQ stocks and more growth-oriented stocks took over. The above chart shows this IWF:IWD ratio pulling back in February as the stock market sees some much-deserved profit taking. One thing that would bother me is if the S&P 500 rallied and broke out again, while the IWF:IWD ratio languished and didn't participate to the upside. That's not the case currently.

Sector/Industry Focus

During this past week of profit taking, the worst-performing industry group has been semiconductors ($DJUSSC). It's also important to note that the month prior, the DJUSSC was one of the top five industry groups. Profit taking is a normal part of stock market behavior. Leaders are leaders every day. What will be important is how the group reacts during the stock market's next rally. We'll want to see leadership again. Currently, here's how the group looks:

The pink circles show that the DJUSSC was simply running out of upside momentum earlier in February. I'm watching the support area from 6500-6700. If the DJUSSC continues to hold it, I don't see any problems whatsoever. If, however, the DJUSSC breaks beneath this zone, we'll need to re-evaluate. For now, I see this group continuing as a leader in 2023, a key driver of significant stock market gains later in the year - probably starting in late March or early April.

ChartLists/Strategies

We're re-introducing our Earnings AD ChartList (EADCL), which is being updated today. This ChartList is designed to highlight key gap support on stocks that gapped higher recently due to earnings and continued rising throughout the trading day after earnings. The stocks on the EADCL are the stocks that show the highest percentages of intraday gains (open to close) the day after earnings are released. They've been filtered to exclude stocks that trade fewer than 200,000 shares a day. Also, I used judgment to delete charts that I didn't like for technical purposes. Here are three examples of stocks on this ChartList hitting nearing or testing key gap support:

ATKR:

WNC:

LSCC:

(Full Disclosure: I own both WNC and LSCC)

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, February 22:

NVDA, TJX, STLA, PXD, BIDU, EBAY, ANSS, EXR, GRMN, ICLR, CTRA, LCID, MOS, TRGP, ETSY, NTAP, TPL, CRL, APA, U, FNF, UTHR, NI, WES, RGEN, ALLE, DVA, IQ, VAC, FIVN, RUN, GIL, WING, TDOC, DRVN, MMSI, PAAS, OUT, PK, LIVN, BCO, BMBL, TNDM, NUVA, EVTC, CAKE, MGNI, VCYT, UCTT, PARR, FVRR, EVBG, LGND, WWW, LMND, OSTK

Thursday, February 23, 2023:

BABA, INTU, AMT, BKNG, EOG, MRNA, NTES, MELI, KDP, AEP, ADSK, SQ, PCG, WBD, NEM, LNG, VICI, CBRE, ALNY, EIX, GPC, DTE, PWR, PODD, PBA, LYV, LKQ, IRM, NICE, LNT, GLPI, GRAB, CE, DPZ, AMH, TFX, LSI, CUBE, MORN, PEN, FND, BBWI, VIPS, DISH, PLNT, BLD, OLED, FCN, W, SWN, BWXT, SRCL, LNTH, ENV, YETI, BHC, IRTC, CCOI, NTLA, NOMD, AAWW, INSM, SHOO, ALRM, NOG, CVNA, OII, FTCH, ATSG, NEO, INFN, KTOS, DVAX, VCEL, OPEN, PLYA, NKLA, CARS, BYND, SHYF

Economic Reports

FOMC minutes released at 2:00pm ET

Happy trading!

Tom