EB Daily Market Report - Thursday, May 4, 2023

ChartLists

The Raised Guidance ChartList (RGCL) has been updated and should be available on our website later today or early tomorrow morning.

Executive Market Summary

• Futures were down overnight and we saw opening gaps to the downside across our major indices
• Gold ($GOLD, +0.98%) nears its all-time high as higher volatility ($VIX, +7.69%) and another drop in the S&P 500 sent investors seeking shelter in precious metals; silver ($SILVER, +2.45%) is very strong also
• Crude oil ($WTIC, -0.22%) is not yet seeing a rebound of any significance
• Defensive sectors are leading today, with real estate (XLRE, +1.23%) the only sector up more than 1%
• Meanwhile, the 2023 leading sector, communication services (XLC, -1.41%) is absorbing some profit taking
• Broadcasting & entertainment ($DJUSBC, -3.15%) is weighing on the XLC
• Earnings continue to drive the market; QUALCOMM (QCOM, -5.53%) is a disappointment in semiconductors ($DJUSSC, -0.38%), though it has rebounding off of its opening gap lower
• The 10-year treasury yield ($TNX) is down another 4 basis points to 3.36%
• Apple, Inc. (AAPL, -1.08%) is set to report its latest quarterly results after today's closing bell

Market Outlook

We've seen mostly selling since about 3pm ET yesterday. The initial reaction to the Fed's decision to hike rates by another 25 basis points was quite volatile in the first 60 minutes. After that, however, the sellers took control. Part of that was likely due to the fact that we had a recent attempt at a breakout on the S&P 500 at 4179 and failed. The bears were emboldened. Now comes the support zone from 4027 (March 29th gap support) to 4056 (recent low close on April 26th). Throw in the 50-day SMA, currently at 4039, and that's a pretty big deal near-term. So my biggest short-term question is whether 4027 support or 4179 resistance is cleared first. I view the winner of this battle as having short-term control of the market.

There has been some good news with respect to the last 24 hours of selling. Check out the move lower in the S&P 500 since 2pm yesterday, but note most growth vs. value ratios are significantly higher:

I don't necessarily view this as the holy grail as one day's rotation really is quite meaningless in the big picture. But it does tell us that Wall Street isn't exactly parting with its accumulation of growth shares in 2023.

Sector/Industry Focus

Banks ($DJUSBK) are having another very difficult day and this week's loss has quickly challenged the March low. If this is another big breakdown, then I'd argue that Wall Street does not agree with JP Morgan (JPM) CEO Jaime Dimon that the worst is behind us in the banking area:

Perhaps this is just a false breakdown and we'll get a big recovery. That's a very definite possibility. But if it's more, if we get another breakdown, all bets are off.

If there's one thing that keeps me up at night, it's the banking troubles we're facing. That has the capability to morph into something much bigger that could seriously impact our economy and both the stock and bond markets.

ChartLists/Strategies

I still view individual stock trading to be very high risk - not that it's ever safe, but the rotation between sectors and industry groups has been fairly extreme. But, depending on your trading style and risk tolerance, there are still plenty of solid setups. It's just whether you want to take on the added risk of individual stock trades.

For those who look to significant price support as a reason to enter a long trade, notwithstanding relative price weakness, then here are 2 you might like:

QCOM:

On my TP live show this morning at StockCharts TV, I mentioned QCOM as a stock that was set to open either just above or just below price support. An open below would have been very cautious, while an open above would suggest higher odds of a rally. We opened just above that key price support and, thus far, are holding the November price support level:

QCOM is NOT a healthy stock, but a bounce off of support wouldn't be shocking to me at all. I'm a momentum trader, so these aren't the types of trades I generally look for, but for those looking for value in a quick trade, QCOM might appeal.

ZM:

This is a play on very long-term price support. Shortly after ZM went public, it doubled in a couple months. Its low price around its IPO was 59.94. On its next major pullback 6 months later, ZM printed a low of 60.97. That was 3 1/2 years ago. Through the pandemic and all the stay-at-home noise, ZM soared to nearly 600 and then cratered, and now trades back near 62. Last week, it traded at a low of 60.45. Today, it hit 60.53. Is it worth a trade now near its all-time low? That's completely up to you, I'm just pointing out the chart:

To say that ZM is at a key support level might be the stock market understatement of 2023.

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, May 4:

AAPL, NVO, SHEL, COP, BUD, BKNG, REGN, ZTS, BDX, PBR, EOG, CNQ, MNST, ICE, SHOP, MRNA, MSI, SRE, FTNT, AEP, ABEV, BCE, PCG, MCHIP, PH, AIG, TEAM, SQ, ED, MTD, TU, BBD, BGNE, APTV, CEG, ALNY, PWR, K, DASH, VMC, AEE, WPM, MLM, MT, MPWR, PODD, ARGX, CAH, PPL, DDOG, XYL, CTRA, DKNG, PBA, RCL, RKT, BALL, TRGP, IRM, LYV, OWL, PARA, WLK, EXPE, LNT, BIO, SWK, H, TFX, AMH, COIN, GDDY, BRKR, MMP, BWA, PCTY, CG, RYAN, FND, LAMR, REG, OTEX, RGA, BILL, CGNX, DLB, HII, NRG, TXRH, PLNT, WCC, DBX, BLD, ITT, NVCR, BERY, ARW, RCM, MLCO, LNTH, FOUR, XPO, RRR, ATI, CRUS, PENN, FOXF, DNB, FIVN, POWI, TDC, AZEK, MTSI, LYFT, ONTO, QLYS, IRTC, W, GOLF, AMN, CCOI, NTLA, GT, PBH, PTON, ERJ, NOG, INSM, KTB, ITRI, ARNC, SHAK, BMBL, MAC, FTDR, SIMO, YELP, NTCT, IDCC, XPOF, VCYT, SBH, CVNA, CARS, AVID, TDS, ATEN

Friday, May 5:

BRK/B, ENB, CI, D, ING, JCI, CNHI, EPAM, AES, MGA, CBOE, IEP, EVRG, UI, BAP, PAA, BEP, FSK, HUN, ESNT, FLR, AMC, OMI

Economic Reports

Initial jobless claims: 242,000 (actual) vs. 238,000 (estimate)

Q1 productivity: -2.7% (actual) vs. +0.0% (estimate)

Q1 unit labor costs: +6.3% (actual) vs. +3.9% (estimate)

Happy trading!

Tom