EB Daily Market Report - Tuesday, June 20, 2023

State of the Market

I'm currently writing a State of the Market DMR that I hope to have completed by tomorrow. It's an in-depth outlook in many different areas of the market and what we might expect as we move forward. I am trying to cover a LOT of areas, so if I can't complete it tomorrow, I'll certainly have it to you by Thursday. This is likely going to be a good week to write it, as I expect the market to struggle.

ChartLists Updated

We've updated the following ChartLists:

• Strong Earnings (SECL)
• Strong Future Earnings (SFECL)
• Strong AD (SADCL)
• Raised Guidance (RGCL)
• Bullish Trifecta (BTCL)

They've been uploaded on our website, so you can now view/download all of these ChartLists.

Executive Market Summary

• Futures were lower overnight and our major indices started off in negative territory
• We've seen a rebound, however, as we wait to see if the weakness since Friday morphs into something larger
• Cryptocurrencies are having a strong session, especially bitcoin ($BTCUSD, +4.78%), which is zeroing in on 28000
• Commodities are down across the board as crude oil ($WTIC, -1.17%) drops below $71 per barrel
• The 10-year treasury yield ($TNX) has fallen 4 basis points to 3.73%
• Consumer discretionary (XLY, +0.64%) is the only sector higher, led by another big push in Tesla (TSLA, +4.98%)
• Home construction ($DJUSHB, +1.28%) is also strong after a very solid report this morning on housing starts and building permits
• Generac Holdings (GNRC, +8.05%) is the best-performing S&P 500 company today

Market Outlook

The Dow Jones Industrial Average ($INDU) is pulling back a bit today after challenging key overhead price resistance:

The number I'm watching here is 34600. The highest close on the Dow Jones in the past 13 months has been 34589. On Friday, the intraday high was 34588. Once the Dow is able to negotiate a close above this level, I believe it'll quickly accelerate and test its all-time high close of 36800.

Sector/Industry Focus

On Friday, I pointed out the breakout in business support services ($DJUSIV). Today, let's look at another key breakout in medical supplies ($DJUSMS):

This is a technical thing of beauty. Relative strength bounced exactly where it needed to - at relative support. The ascending triangle pattern is a very bullish continuation pattern. The measurement is from the price resistance line (1432) down to the initial low (1270). This means that we add this difference, or 162, to the breakout level of 1432 and we get a target of 1594. That's still a big advance from current price and will likely set up many individual medical supplies stocks for big advances as well.

ChartLists/Strategies

It totally makes sense to be somewhat cautious in short-term trading. One way to keep risk low is to simply look to trade very low risk stocks - like those in real estate, for instance. I'm seeing a few promising characteristics in Simon Property Group (SPG) that makes it a fairly attractive and relatively low-risk trade candidate:

The AD line certainly points to the likelihood that SPG has been under significant accumulation. This line didn't budge to the downside while the double bottom printed. Also, that double bottom makes Friday's slight breakout above key closing price resistance an extremely bullish development. Bullish momentum is accelerating, as evidenced by the rising PPO. The golden cross shouldn't be overlooked either. The last time it occurred in October 2022, it led to significant gains in the weeks to follow.

I don't believe SPG will be a big winner on a relative basis over the long-term, but this is a much safer trade right now than many of the aggressive growth names.

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, June 20:

FDX, LZB

Wednesday, June 21:

KBH, PDCO, WGO, EPAC, CDMO, SCS

Economic Reports

May housing starts: 1,631,000 (actual) vs. 1,400,000 (estimate)

May building permits: 1,491,000 (actual) vs. 1,433,000 (estimate)

Happy trading!

Tom