EB Daily Market Report - Wednesday, July 26, 2023
Executive Market Summary
- Futures were mostly lower overnight, but we did see morning strength on the Dow Jones
- Rotation is definitely helping small caps and mid caps today; the IWM (small caps) is up roughly 0.40%, going against the grain of its large cap index counterparts, which are lower
- Commodities are mixed and crude oil ($WTIC, -1.05%) is retreating from $80 per barrel
- Sector performance is a bit strange today as communication services (XLC, +1.21%) leads and technology (XLK, -1.67%)
- Alphabet (GOOGL, +5.81%) and Microsoft (MSFT, -4.62%) are moving in opposite directions after earnings, which helps to explain the sector conundrum
- The 10-year treasury yield ($TNX) is down slightly and is just below 3.90% as Fed Chief Powell gets set to announce another fed funds rate hike
- Boeing (BA, +6.82%) is helping the Dow Jones today after reporting better-than-expected earnings results
Market Outlook
We've been focused a lot on short-term market moves, but here's a quick look at the NASDAQ 100 on a 5-year weekly chart. Note that all-time highs are not far away and the move higher since the start of the year is quite obvious:
After falling more than 35% in the 2022 cyclical bear market, the NDX has made up most of those losses, with only another 7% or so to the upside to challenge that November 2021 all-time high.
Sector/Industry Focus
Gold ($GOLD) is at an interesting point on its chart with the Fed on deck. Its 20-day EMA is rising, showing a bit of short-term strength, but its 50-day SMA is declining and that suggests that the intermediate-term is not so strong. Complicating all of this is that current price action is sitting squarely on both. Which way will gold break?
I've been on record for years, saying I'm not a fan of gold. If the Volatility Index ($VIX) begins to surge, that would represent an environment where not only gold goes higher, but it also outperforms the S&P 500. Barring that development, I believe gold will underperform stocks.
ChartLists/Strategies
I think it's prudent to remain somewhat conservative for now. We've had a big run higher in our major indices and that's resulted in negative divergences on some charts, including the important NASDAQ 100 chart. Throw in the Fed meeting that culminates with the latest policy statement momentarily, and it's rather obvious that we face potential short-term volatility. That could make short-term trading very interesting and quite risky.
During today's LIVE trading room, I took on two relatively SMALL positions. I like both stocks, but they are not immune to the potential weakness and short-term volatility ahead, so keeping stops in play probably makes sense. Unfortunately, that can result in whipsaw action and quick stop outs and recoveries. But it is what it is. Here they are:
Manhattan Associates, Inc. (MANH)
MANH had a negative divergence that's now been resolved. It doesn't mean MANH can't keep going lower, but I'm expecting a reversal. MANH has been one of the strongest software stocks and that's been an outstanding industry in 2023. Yesterday, MANH beat Wall Street consensus estimates as to both revenues and EPS. I believe this selling is an opportunity, so this morning in our LIVE trading room, I bought MANH at 187.265. I actually added a bit more at 185.75. I'll keep an intraday stop in play at 179.99, potentially risking less than 4% to the downside. I'm looking for MANH to run back to its recent high.
Autonation, Inc. (AN)
AN had a huge pre-earnings rise and the "sell on the news" has taken the stock down to the bottom Fibonacci retracement level (61.8%). It's do or die here. I was waiting for the stock to show a bit of strength before jumping in, which we've now seen over the past couple days. I bought this morning at 154.52 and plan to hold until it reaches its recent high. To the downside, any move below 150 would be problematic technically.
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 notable 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 that you own or are considering owning.
Wednesday, July 26:
META, KO, TMO, UNP, BA, NOW, T, ADP, LRCX, FI, GSK, CME, GD, ORLY, STLA, CMG, EW, APH, HES, TEL, QDFL, HLT, LHX, LYG, AMP, OTIS, VICI, URI, ACGL, AWK, EBAY, FTV, ALGN, AEM, GIB, DB, RJF, RCI, INVH, ROL, ICLR, TDY, MOH, UMC, MAA, TER, SUI, PTC, TYL, ASX, IEX, DGX, CHKP, AGR, GGG, EG, UDR, CSL, GFL, FLEX, STX, RPM, OC, PAG, ALLE, GL, RDY, NLY, SEIC, LAD, MAT, YNDX, WH, TNET, TMHC, SLAB, WU, HP, QS, SLM, TSEM, COOP, GPI, LIVN, MXL, MHO, OII, CLS, LC, HCSG, TLRY
Thursday, July 27:
MA, ABBV, SHEL, MCD, LIN, CMCSA, TMUS, TTE, INTC, HON, BMY, SPGI, BUD, MDLZ, DEO, PBR, AMT, HCA, CP, BSX, NOC, VALE, KLAC, F, NSC, HSY, ABEV, DXCM, AJG, STM, VLO, KDP, AEP, CARR, PCG, GWW, DLR, XEL, CVE, BCS, MBLY, MTD, MLM, WST, EIX, CBRE, RCL, EQR, WY, WTW, BAX, ENPH, TEF, DTE, TSCO, HIG, LYV, MT, LUV, VRSN, TECK, FSLR, WAB, PFG, CNP, LH, CMS, LPLA, TW, RS, CINF, ESS, FMS, SSNC, LKQ, DECK, TXT, AMH, MAS, KIM, GLPI, PEAK, LECO, LII, OVV, AOS, IP, PNR, CX, AGCO, EMN, ROKU, JNPR, SKX, FTI, TXRH, CROX, BYD, MHK, OLN, APPF, X, HOG, ALSN, MTH, SRCL, PFSI, ATHM, INMD, TPH, PRFT, HUBG, NTCT, LVWR, COUR, SKYW, SG, OSTK, OTLY
Economic Reports
June new home sales: 697,000 (actual) vs. 727,000 (estimate)
FOMC policy statement to be released at 2:00pm ET
Happy trading!
Tom