EB Daily Market Report - Thursday, June 8, 2023
Executive Market Summary
- Futures were fairly flat at the open
- Money has rotated into the more aggressive NASDAQ since the opening bell, while the red-hot mid and small caps retreat
- Consumer discretionary (XLY, +1.34%) is leading the market higher, along with technology (XLK, +1.00%); I discuss the XLY more below
- Gold ($GOLD, +1.19%) and silver ($SILVER, +3.17%) are having a very nice day
- Crude oil ($WTIC, -4.08%) has dropped back below $70 per barrel and energy (XLE, -1.36%) is today's worst-performing sector
- The 10-year treasury yield ($TNX) is down 5 basis points as initial jobless claims rose much more than expected
- Boeing (BA, +2.30%) is the best performer among Dow Jones component stocks
Market Outlook
I'll give you a quick update on my strategy with the TNA (leveraged ETF that tracks the IWM, or Russell 2000, at a 3 to 1 clip), though it certainly doesn't have to be your strategy. I am up significantly on my TNA position. I want to ensure that I book the majority of these profits. So, I will use a CLOSING stop of 183.80, which was Tuesday's close. If IWM closes beneath this level, I will take my profits on the TNA and move into the IWM. I'll still be fully invested, but I'll eliminate leverage. I can always decide to get back in later. The other key level to watch on the IWM, in my opinion, is its rising 20-day EMA, which is currently at 178.32. If I waited that long, I'd lose most of my profits, which is unacceptable to me. However, that might be more appealing to some of you - to give small caps much more downside room.
That's how I'm currently thinking, but again, it's completely up to you if you're holding the TNA.
Sector/Industry Focus
Consumer discretionary (XLY) stocks continue to improve and it's a group that I like a lot. Both Amazon.com (AMZN) and Tesla (TSLA) have broken out recently and they are very large components within the XLY. If they move higher, not much will hold back the XLY. So it's a great long trade if you like the charts of those two stocks. Here's how the XLY looks now:
The PPO is very bullish and showing strong momentum. The AD line has improved all year long and is quite bullish as well. I view support in the 153-155 range, with the next key price resistance near 172 (August high).
ChartLists/Strategies
Here are two interesting charts that I stumbled up on our Strong Earnings ChartList (SECL):
LFST:
Nice cup with handle after an extended uptrend. Many times, these handles form down to the rising 20-day EMA. You could keep a very tight closing stop at that moving average to help mitigate risk.
JWN:
JWN is also on our Short Squeeze ChartList (SSCL). Volume has been accelerating in recent days. This is a VERY RISKY trade, but if JWN begins to push through 19.60 and volume increases, it could EXPLODE to the upside. Buying here on this pullback is even MORE RISKY as it anticipates the next breakout, so each individual must decide if this type of risk is appropriate. I can't make that decision for others. If it ultimately fails here at 19.60, it could also be a quick trip back to 17.50 or so. It's on my radar, though I don't currently own it.
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, June 8:
MTN, DOCU, TTC, BRZE, SIG, NAPA
Friday, June 9:
NIO
Economic Reports
Initial jobless claims: 261,000 (actual) vs. 235,000 (estimate)
Happy trading!
Tom