EB Daily Market Report - Wednesday, April 5, 2023
The Bulls-Eye Forecast
We have scheduled a new event for Saturday, April 15th. The event will begin at 10:00am ET and all EarningsBeats.com members will automatically be registered. There is no need for you to register individually. We will send out room instructions prior to the event.
We're holding this event as a sequel to our MarketVision 2023. I want to update everyone as to where we stand, take a look at bullish and bearish arguments and let the weight of the evidence determine where we're likely headed during the balance of Q2 and full year 2023.
Executive Market Summary
- Futures were mixed overnight, with more strength in Dow Jones names
- The March ADP employment report came in positive, but below expectations, potentially indicating a slowing economy and job market
- The 10-year treasury yield ($TNX) immediately dropped and is down 5 basis points to 3.29%, breaking just below prior yield support
- Market participants' initial reaction was to sell growth stocks (IWF, -1.00%, because of potentially lower profits
- Lower rates make future earnings much more valuable, so it'll be quite interesting to see how this plays out, especially if Friday's nonfarm payrolls come in similarly weak
- Commodities are mixed on the session, with crude oil ($WTIC, -0.32%) clinging to $80 per barrel
- The defensive sectors are leading today as utilities (XLU, +2.62%) and health care (XLV, +1.83%) are clear leaders
- Aggressive growth-oriented sectors are trailing; consumer discretionary (XLY, -1.93%) is today's weakest sector
- Automobiles ($DJUSAU, -3.50%) are weighing on discretionary stocks
- Health care stocks like JNJ (+4.20%) and UNH (+3.55%) are providing a big lift to the Dow Jones
Market Outlook
Any time the stock market rallies and the daily PPO is moving higher after a recent PPO centerline test or crossover, I look to the rising 20-day EMA for initial support. That's the typical behavior if our major indices truly are trending higher, as opposed to consolidating. So let's check out the S&P 500 and NASDAQ 100 to get a feel for where we might find support:
S&P 500:
NASDAQ 100:
Both of these critical indices are currently trending higher with momentum (PPO) strengthening. There are also considerable signs of accumulation as their AD lines are soaring. I would expect to see the rising 20-day EMAs to hold IF they're tested. Just like there's no guarantee that we break above resistance, there's also no guarantee we even reach those 20-day EMAs before turning higher.
Sector/Industry Focus
Restaurants & bars ($DJUSRU) is the only industry group within the consumer discretionary sector that's higher today. It's also just broken out to new recent highs:
If we use some common sense, would you expect this group to be breaking out if Wall Street was truly concerned about a meaningful recession and market selloff? Yeah, me neither.
ChartLists/Strategies
That 60-minute negative divergence on the NASDAQ 100 ($NDX) has resulted in a PPO reset and 50-hour SMA test. So trading the QQQ off of this support makes sense to me. You can keep a tight stop in play at roughly 314. Any close beneath that level would take the short-term momentum to the downside and you could exit rather quickly.
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, April 5:
CAG, SMPL, SLP, SCHN
Thursday, April 6:
STZ, LW, RPM, LEVI, WDFC
Economic Reports
March ADP employment report: 145,000 (actual) vs. 200,000 (estimate)
March ISM services: 51.2 (actual) vs. 54.4 (estimate)
Happy trading!
Tom