EB Daily Market Report - Tuesday, May 2, 2023

Tom Bowley - May 02, 2023

ChartLists and May Reports

I've updated a number of our key ChartLists, including the following:

Strong Earnings (SECL)
Strong Future Earnings (SFECL)
Short Squeeze (SSCL)
Seasonality (SEASCL)

I'm continuing to work on updating other ChartLists. I'll keep you posted.

Earlier today, I sent out our "EB Monthly Seasonality Report - May 2023" and our "EB Short Squeeze Report - May 2023". With regard to the May Seasonality Report, please note that many of the stocks that typically perform well in May also will be reporting their latest quarterly results this month. Accordingly, be prepared for possible increased volatility with many of these names.

Executive Market Summary

Futures were down overnight and the selling escalated after the opening bell
All of our major indices are down just over 1%
The Volatility Index ($VIX, +9.64%) has spiked back above 17
The 10-year treasury yield ($TNX) has dropped 13 basis points to 3.44%, ahead of the Fed's decision
All 11 sectors are lower, but it's the value-oriented energy (XLE, -4.18%) and financial (XLF, -2.24%) sectors taking the biggest hits
Meanwhile, consumer discretionary (XLY, -0.05%) is relatively unscathed today
Commodities are mixed; gold ($GOLD, +1.65%) has climbed back above $2000 per ounce, while crude prices ($WTIC, -5.25%) are tumbling
Arista Networks (ANET, -15.15%) is the worst-performing S&P 500 company after releasing its latest quarterly results

Market Outlook

The latest Fed meeting is underway and we'll find out tomorrow at 2:00pm ET exactly what the Fed is thinking. Most market participants are looking for a 25-basis point hike in the fed funds rate.

While the market has struggled in the past couple days to make and/or sustain key price breakouts, my intraday QQQ:SPY and XLY:XLP analysis continue to support higher prices ahead. Check these out:

QQQ:SPY

The bottom panel shows the QQQ:SPY downtrending over the past 4-5 weeks, while our proprietary intraday QQQ:SPY (ignores gaps) suggests there's been no weakness in this ratio.

XLY:XLP

This is even more pronounced. It looks like money has been rotating significantly away from discretionary (XLY) and into staples (XLP). However, the intraday analysis tells a completely different picture. The "bearish" rotation that we're seeing is at the opening bell. Intraday, the XLY:XLP has been relatively flat, showing no signs of Wall Street firms actually rotating into the more defensive staples.

Also, look intraday at the following relative charts:

IWF:IWD
DJUSGL:DJUSVL
DJUSGM:DJUSVM
DJUSGS:DJUSVS

All are suggesting that Wall Street is moving INTO growth ahead of tomorrow's big Fed announcement. It seems to indicate that Wall Street believes the Fed will begin shifting its focus from inflation to the economic environment. That would benefit growth stocks vs. value stocks.

Sector/Industry Focus

Let's take a look at the most recent sentiment charts relating to the equity-only put-call ratio ($CPCE). Check out where the 5-day moving average of the CPCE currently resides:

Yeah, I was surprised too. I normally don't look at this chart, unless we're in the midst of a significant selloff. Currently, we're flat and near key breakouts. Yet the pessimists are out there everywhere. As a reminder, when the 5-day moving average of the CPCE moves near or above .80, history tells us it's time to BUY, not SELL. Fear has been ramping up in recent days and that's a very good sign for U.S. equities short-term.

ChartLists/Strategies

Let's pass on trade candidates one day ahead of the Fed policy decision.

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.

Tuesday, May 2:

PFE, AMD, SBUX, BP, ITW, ETN, TRI, UBER, EPD, MPC, MAR, ECL, F, IDXX, ET, WELL, SYY, LNG, SPG, MPLX, ABC, CMI, PEG, AME, DD, PRU, FNV, OKE, ZBH, EIX, YUMC, TROW, IT, QSR, CLX, EXR, HWM, PAYC, EXPD, BR, INCY, AMCR, ZBRA, AER, TAP, LDOS, JKHY, SRPT, LSI, PEN, CHK, AFG, MTCH, CZR, AGCO, RNR, UNM, RGEN, INSP, GPK, VOYA, AXTA, SEE, OHI, AIZ, ADT, MUSA, IPGP, SMCI, WK, TRTN, SUN, WU, LTHM, LOPE, INMD, MDC, SAGE, SPT, MRCY, LGIH, OMCL, CVLT, PRFT, ATRC, VIAV, TGH, HLF, XHR, DVAX, NRDS

Wednesday, May 3:

QCOM, CVS, EL, EQIX, MELI, STLA, PSA, KHC, EMR, MET, PSX, CTVA, TT, EXC, O, YUM, WMB, GOLD, ALL, CTSH, VRSK, ANSS, ES, HZNP, IR, CDW, ALB, FTS, HUBS, GRMN, ATO, SEDG, BIP, FLT, MRO, MOS, BG, BLDR, ETSY, TECH, NI, TRMB, HST, APA, TPL, UTHR, GL, WES, QGEN, ZG, NBIX, CDAY, QRVO, XRAY, WWE, CLH, INGR, CFLT, GNRC, OLED, TXG, WING, QDEL, GIL, MUR, MKSI, TKR, EEFT, VAC, RUN, INFA, LPX, JHG, EVH, ACLS, AVT, SMG, SR, AVNT, SYNA, STAA, AEIS, SPR, RELY, WERN, ERJ, OUT, KLIC, NGVT, AMED, LIVN, TNDM, TRIP, SITM, SPWR, GKOS, FORM, VET, CPE, CRTO, NUS, ALGT, FSLY, FROG, EAT, MYGN, GOGO, CSGS, KTOS, PERI, RVLV, INFN, SBGI, VSTO, UDMY, UPWK, PLMR, OPK

Economic Reports

FOMC meeting begins today (and ends tomorrow with the FOMC policy statement at 2:00pm ET)

March factory orders: +0.9% (actual) vs. +1.3% (estimate)

Happy trading!

Tom