EB Daily Market Report - Monday, May 8, 2023

Tom Bowley - May 08, 2023

Executive Market Summary

Futures were mixed overnight with a bit of relative strength in the Dow Jones and S&P 500
That has flipped during the trading session, however, with the NASDAQ now outperforming
Small caps ($SML, -0.45%) and mid caps ($MID, -0.28%) are lagging the other major indices
Cryptocurrencies are struggling today as bitcoin ($BTCUSD, -5.04%) falls nearly 1500 points
Crude oil ($WTIC, +2.13%) continues to rebound, nearing $73 per barrel; energy (XLE, +0.22%) is one of four sectors higher on the day
Communication services (XLC, +0.98%) provides leadership, benefiting from a strong media agencies group ($DJUSAV, +2.52%)
Two defensive groups - real estate (XLRE, -0.69%) and health care (XLV, -0.34%) - are lagging the other sectors
The 10-year treasury yield ($TNX) is up 7 basis points to 3.52% as the bond market gears up for inflation reports later in the week - the April CPI will be released on Wednesday and the April PPI on Thursday
Advanced Micro Devices (AMD, +6.09%) is providing semiconductors ($DJUSSC, +0.72%) another lift today

Market Outlook

The Volatility Index ($VIX) has been trending lower for months now, which is a very good sign for stocks. It lets me know that the stock market can handle bad news relatively well and that "no news" is likely to send stocks higher. Here's a 1-year chart of the VIX:

As long as the VIX continues to trend lower and the VIX spikes are lower than the ones before, it's a very good sign for U.S. equities.

Sector/Industry Focus

I'm keeping an eye on footwear ($DJUSFT) as it appears we have a bullish cup with handle continuation pattern in play:

This pattern would measure to roughly 2700 on a confirmed breakout above 2425. That would provide a lot of potential profits on stocks in that space.

ChartLists/Strategies

On my TP Live show this morning, I was illustrating how to use the Downtrend Reversal scan against our Strong Earnings ChartList (SECL) and Raised Guidance ChartList (RGCL). I ran it just a couple minutes after the stock market opened and two stocks met the criteria - NCNO and SIG. Both are higher today. The results of that same scan now yields 7 stocks as follows:

AMCX
IMAX
NCNO
SIG
SSTK
TRU
XRX

Off of this list, I really like the IMAX setup and I bought it. SSTK is extremely oversold, so for those who like to see oversold bounces, this one might be for you. Check out both charts:

IMAX:

I typically buy my stocks on pullbacks. I love the test of price support and the 50-day EMA here. It seems to just be turning higher from a key level. I wouldn't be surprised to see IMAX return to its recent high in fairly quick order. But I'll have a closing stop in place at around 19. My buy strategy was to buy in two stages - first at current price and second around 19.20 or so - just above the 50-day SMA. The volume trend here is strong, plus the AD line is just now testing its recent support and the IMAX relative strength line vs. its peers is at support as well.

SSTK:

RSI reached 25, which is VERY oversold. But make no mistake about it, SSTK was being heavily distributed last week, so if I traded it, it would be a "hit and run" type of trade. Try to get a quick rebound and GET OUT. A move back to the 20-day EMA would be perfect, but it may not get that far. Again, this isn't my kind of trade, but there is potential for a quick profit.

Another stock that caught my attention this morning, though it wasn't returned as part of the above scan, is Zimmer Biomet Holdings (ZBH):

I took a position in ZBH today and I'll use the 20-day EMA as my closing stop.

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.

Monday, May 8:

PYPL, MCK, ITUB, KKR, SU, DVN, BNTX, IFF, TSN, VTR, SWKS, PLTR, LCID, ACM, WTRG, VTRS, WDC, SWAV, DVI, PRI, PLUG, IPAR, CBT, TGNA, DISH, ACAD, FN, PGNY, THS, HIMS, INTA, ENR, MWA, TDW, NEO, HLIT, TASK, DDD

Tuesday, May 9:

DUK, ABNB, APD, OXY, TDG, ALC, EA, APO, CHT, GFS, CPNG, RPRX, EC, WAT, EDR, FOXA, AXON, J, WMG, WYNN, BSY, AKAM, RIVN, EXAS, CE, HSCI, AGL, COTY, MASI, TWLO, CTLT, ARMK, OVV, CELH, CHH, KGC, TPX, NTRA, IGT, PRGO, HRB, DUOL, ATKR, SWX, SQSP, TWNK, UA, LNC, LITE, ZD, DOCN, RVNC, RPD, AFRM, ARRY, APPN, SHOO, RNG, OLPX, GH, MQ, BOOT, CRCT, CARG, ZIP, SILK, VZIO, BLDP, OTLY, ANGI, MODN, IRBT, CRNC, UPST

Economic Reports

None

Happy trading!

Tom