EB Daily Market Report - Friday, March 24, 2023

ChartLists

I've updated three ChartLists as follows:

• Strong Earnings (SECL)
• Strong Future Earnings (SFECL)
• Short Squeeze (SSCL)

They should be updated on our website later today or perhaps tomorrow morning.

Executive Market Summary

• Futures were weak overnight and this morning and we opened in negative territory
• The NASDAQ began the day showing relative strength, but for the first time in awhile, that has reversed and the NASDAQ lags both the Dow Jones and the S&P 500
• Growth (IWF, +0.36%) is also trailing value (IWD, +0.83%) for the second straight session
• The 10-year treasury yield ($TNX) fell 3 basis points to close at 3.38%, but the intraday low of 3.295% was the lowest we've seen since September 2022
• The Volatility Index ($VIX), after hitting 25 the past two sessions, has backed off and is near 22 today
• Most commodities are lower, including crude oil ($WTIC, -0.90%), which is back below $70 per barrel
• Semiconductors ($DJUSSC, -1.63%) is seeing a bit of profit taking after a recent steady advance
• Accordingly, technology (XLK, +0.12%) is among the weaker sectors; consumer discretionary (XLY, -0.23%) is the weakest sector, led to the downside by hotels ($DJUSLG, -1.88%) and travel & tourism ($DJUSTT, -1.45%)

Market Outlook

The past two days, we've seen breakout attempts with weakness late in the session. Today, we're seeing a bit of the opposite. We started the day weak, but are currently at the highs of the day. For the QQQ, the closing breakout level remains at 311.24:

The PPO and AD line are supporting higher prices if we get the price breakout. We're at 310.75 right now, so we're not far from confirming a price breakout.

Sector/Industry Focus

Toys ($DJUSTY) have been a very weak area of the market for a long time, but we are seeing a breakout in the group today:

The rising AD line is also supporting today's breakout. I'd look at the two horizontal lines on the chart as key price support going forward, along with the now-rising 20-day EMA.

ChartLists/Strategies

I placed two individual trades off of our Strong Earnings ChartList (SECL) today, and they're both similar in nature and strategy:

FL:

WGO:

Both stocks reacted positively to better-than-expected quarterly revenues and EPS. I like FL a bit better, because it's more of a leader, while WGO has struggled against its peer group. But I'm risking very little. If either FL or WGO closes beneath the price support levels shown above, I'll exit.

I've seen many stocks over the years like these two - they get positive reactions to earnings, gap higher, than proceed to fall back significantly to a key gap support level, then start working their way higher again. That's what I'm looking for here and with a VERY tight leash.

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.

Friday, March 24:

None

Monday, March 27:

BNTX, HTHT, CCL, PVH

Economic Reports

February durable goods: -1.0% (actual) vs. 1.5% (estimate)

February durable goods ex-transports: +0.0% (actual) vs. +0.3% (estimate)

Happy trading!

Tom