EB Daily Market Report - Thursday, April 13, 2023

Tom Bowley - April 13, 2023

The Bulls-Eye Forecast This Saturday!

Just a quick reminder that our special event will be held at 10:00am ET on Saturday. Hope you can join us! We will send out room instructions, so there's no need for EB.com members to register.

Executive Market Summary

For the second straight day, we've seen tame inflationary data and gaps higher in our major indices
One big difference today is that money is rotating back to growth; if this continues, consider it quite bullish
Cryptocurrencies are again having an excellent day as etherium ($ETHUSD, +5.03%) rips higher and shows relative strength; bitcoin ($BTCUSD, +1.94%) is up and back above 30,000
Commodities are mixed, but gold ($GOLD, +1.54%) continues its hot streak, while crude oil ($WTIC, -0.54%) weakens
The 10-year treasury yield ($TNX) is flat at 3.42%, despite a much-weaker-than-expected March PPI report
Growth stocks (IWF, +1.08%), however, are clobbering their value counterparts (IWD, +0.16%) in a return to a "risk on" environment
Sector leadership is found in communication services (XLC, +1.57%) and consumer discretionary (XLY, +1.25%)
Internet stocks ($DJUSNS, +2.01%) are jumping again, helping to lift the XLC
Meanwhile, defensive sectors are lagging, with utilities (XLU, -1.32%) and real estate (XLRE, -1.12%) both down more than 1%

Market Outlook

The Dow Jones ($INDU) has been trending higher in April and appears destined to reach and test the price highs from August through February:

The next 1-2% will take us right up this level - and you can see how many times we've been in this region. A breakout above multiple tests of resistance would add much bullishness to the chart. Given the bottom panel, showing the massive level of accumulation that appears to be taking place, I'd say the Dow's breakout is a matter of when, not if.

Sector/Industry Focus

One group that might be worth watching (probably too early to take too seriously just yet) is apparel retail ($DJUSRA). Over the past week, it's been one of the worst-performing industry groups, but it did print a positive divergence and saw a PPO centerline reset AND a 50-day SMA test. It's rolled back over, but if this group can clear its recent high, that would suggest MUCH higher prices ahead. Buying into the space now is assuming that breakout will occur. If it does, you'd make a lot more money. However, anticipating moves can prove extremely costly, especially if the overall market were to turn lower (since it's been a lagging group for several weeks now):

It has a ways to go, but watch the 1160 price resistance level. Should the DJUSRA close above it, many apparel retail stocks would be worth looking at.

ChartLists/Strategies

Yesterday, I highlighted 18 stocks that had lower highs during each of the prior 5 days. By running our Downtrend Reversal scan this morning, there have been 5 of those 18 stocks that COULD be reversing. They've each finally printed a higher intraday high. Will it matter? I don't know, but here are the 5 stocks:

MGNX, WDAY, KDNY, BTU, AMZN

I like WDAY best of these 5, followed by AMZN. Here's my take on WDAY:

Reversing a downtrend right off of price support is the poster child of "broken price resistance becomes price support". WDAY is in the red-hot software space and knowing that May through August typically produces relative strength in aggressive/growth stocks adds tremendous confidence to this trade - at least for me. I don't currently own WDAY, but if we see any meaningful pullback intraday, I may buy it. Notice also that even on the days where we've seen heavy volume, we've also seen afternoon recoveries, which has sent WDAY's AD line soaring.

Also, GWW is getting hammered today, but I LOVE the reversal at major gap support. I've just bought and will keep a stop below gap support of 636.42:

The AD line remains very strong here, so reversing off this morning's selling is exactly what I'd expect to see. But I want it to hold gap support from its quarterly earnings.

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, April 13:

PGR, FAST, DAL, FIZZ

Friday, April 14:

UNH, JPM, WFC, BLK, C, PNC

Economic Reports

Initial jobless claims: 239,000 (actual) vs. 235,000 (estimate)

March PPI: -0.5% (actual) vs. +0.0% (estimate)

March Core PPI: +0.1% (actual) vs. +0.3% (estimate)

Happy trading!

Tom