EB Daily Market Report - Thursday, July 27, 2023

Tom Bowley - July 27, 2023

Executive Market Summary

Futures were strong overnight and we gapped higher across all of our major indices
We were humming along until the afternoon session, when we began seeing a very significant selloff
The most significant selling occurred on the NASDAQ, reversing what was a very strong morning
The only sector currently positive is communication services (XLC, +1.02%)
Among the other 10 sectors, the defensive sectors - utilities (XLU, -1.83%) and real estate (XLRE, -1.73%) are being hit the hardest
Internet stocks ($DJUSNS, +1.06%) are enjoying another solid day, though they're well off their earlier high
The 10-year treasury yield ($TNX) has jumped 16 basis points to 4.01%, likely triggering the stock market selloff
Gold ($GOLD, -1.29%) and silver ($SILVER, -2.86%) are both down significantly; crude oil ($WTIC, +1.35%) is nearing $80 per barrel, though energy (XLE, -0.86%) is not following suit
eBay, Inc (EBAY, -10.66%) and Chipotle Mexican Grill (CMG, -10.04%) are leading the S&P 500 to the downside after reporting quarterly results
Meanwhile, Meta Platforms (META, +4.50%) and Align Technology (ALGN, +12.90%) are both up nicely after their quarterly results

Market Outlook

I've updated our 3 key proprietary intermarket ratios and here they are:

QQQ:SPY

XLY:XLP

IWM:QQQ

When the stock market pulls back, I'd fully expect to see some deterioration in the intraday QQQ:SPY and XLY:XLP, so I don't read too much from the last week's decline. However, I am interested in the solid breakout in the IWM:QQQ ratio - including gaps and excluding gaps. This suggests to me that there is rotation from the NASDAQ to the Russell 2000. As a result, I will become aggressive on the IWM either (1) on a 20-day EMA test, or (2) a closing breakout above 199.00.

Sector/Industry Focus

Home improvements ($DJUSHI) is the latest industry in the consumer discretionary sector poised for a breakout. We're not there yet, but certainly getting close:

I like the relative breakout to a 5-month high, but we still need to see an absolute breakout, clearing the 740-760 gap and price resistance zone.

ChartLists/Strategies

Yesterday, I mentioned that short-term trading could be quite risky and volatile and I think today's price action could be a poster child for both of those adjectives. It's been crazy. We're going to remain relatively quiet on the individual stock trading front.

Here's a quick update on the two trades that I made in yesterday's live trading room:

Manhattan Associates, Inc. (MANH)

The PPO "reset" to its centerline is nearly complete and we've already seen a 50-day SMA. I remain bullish MANH and believe it's holding up fairly well, considering the huge market reversal today.

Autonation, Inc. (AN)

AN has managed to move a bit higher today, establishing yet another higher intraday high and higher intraday low. I remain in this one, looking for continuing improvement on the chart.

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.

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

Friday, July 28:

XOM, PG, CVX, AZN, SNY, AON, CL, CHTR, CNC, TRP, IMO, TROW, CHD, CNHI, WPC, AVTR, BAH, BEN, SAIA, STVN, NVT, GNTX, GTLS, POR, NWL, CRI, DAN, ARCB

Economic Reports

Initial jobless claims: 221,000 (actual) vs. 235,000 (estimate)

Q2 GDP (Initial Estimate): 2.4% (actual) vs. 1.5% (estimate)

June durable goods: +4.7% (actual) vs. +0.5% (estimate)

June durable goods ex-transports: +0.6% (actual) vs. -0.1% (estimate)

Happy trading!

Tom