EB Daily Market Report - Monday, August 7, 2023
ChartLists Updated
I've updated the following ChartLists:
- Strong Earnings (SECL)
- Strong Future Earnings (SFECL)
We should have them updated on our website later today.
Executive Market Summary
- Futures were mostly higher overnight and we kicked off a new week in positive territory
- The Dow Jones is leading on a relative basis, while small caps lag a bit
- Also, large cap value (IWD, +0.89%) is outperforming large cap growth (IWF, +0.48%) in a sign that it might be a tad early to venture back into the most aggressive areas
- 368-370 does look like a solid area of support on the QQQ and we've traded the past few sessions near 371
- Crypto and commodities are mostly very close to the zero line today
- The 10-year treasury yield ($TNX) is up 1 basis point to 4.07%, also looking for direction
- Financials (XLF, +1.45%) are leading today's action, while technology (XLK, +0.00%) is trailing the field and completely flat
- Computer hardware ($DJUSCR, -1.68%) is weak as Apple, Inc. (AAPL, -1.84%) suffers from a post-earnings hangover
Correction
In the EB Weekly Portfolio Report that was sent out last evening, I mentioned that the July CPI and PPI would be released on Wednesday and Thursday mornings, respectively. Those reports will actually be released on Thursday and Friday mornings and could have significant impacts on short-term trading.
Market Outlook
I've filled out my position on TNA, the leveraged ETF that tracks the small cap IWM at 3 to 1 clip. My final entry was 38.25, which triggered earlier this morning. Thus far, the candle today on the IWM could not be much more bullish. We've seen a false breakdown beneath the 20-day EMA, with a recovery well back above it. I see the IWM uptrending from here and clearing the recent high and moving into the 200s. Here's today's chart:
The AD line looks superb, as does that successful 20-day EMA test. But anything can happen, so I've included an INTRADAY stop on the TNA below 192.25, which is roughly 0.25% below today's low. I've built up a fairly sizable position by trading out of the IWM and into the TNA during the recent downtrend. If the IWM accelerates lower, I don't want to stand in front of a potential freight train. Instead, I'll move to the sidelines and look to re-enter the TNA as the IWM hits the other two price support levels that I've identified above.
Sector/Industry Focus
The medical equipment group ($DJUSAM) has not traded well and has been a relative laggard as you can see below:
But we're in a secular bull market, where just about every area participates to the upside to some degree. The DJUSAM is testing a fairly important trendline and is doing so just as a 60-minute positive divergence emerges:
Hey, don't get me wrong. This has been an ugly chart, but I like to evaluate risk. And looking at these two charts objectively, I see a major trend line support being tested at exactly the same time that the hourly chart is suggesting slowing downside momentum. This is a GREAT time to look at potential trades in the medical equipment area, which is what I do below.
ChartLists/Strategies
Let's dive into that medical equipment group, starting with the highest SCTRs in a few of our key ChartLists. Here's the scan that I ran:
Here are the results of the scan:
These are 7 stocks I'd focus on.
MDXG:
This is a small stock and carries additional risk because of it. The key price support levels to watch are 7.25, then 6.90. If the group strengthens, it would be easy to see this one back above 8.50.
GKOS:
The 69-72 range would seem like a better area to buy and manage risk, but volume trends have been strong. There is a negative divergence in play that would make me hesitate.
OSUR:
The volatility here is nearly breath-taking. It's risen nearly 50% in less than two full trading days. You need to love the casinos to jump in here. I do like the breakout above price resistance near 5.70, so a move back down to that level might encourage me to take a shot. But clearly, this one should be viewed as extremely risky.
TCMD:
This one has seen significant profit taking and could set up better, at least from a risk management perspective, than the others above. 18.60-20.20 would appear to be a solid area to accumulate. A return trip to 26 would result in a very nice profit.
ATRC:
I'd expect to see the rising 20-day EMA hold as support as the daily PPO is rising and recently set a new high.
INMD:
I like this one at gap support. INMD has already tested gap support twice and currently resides almost squarely on its 20-day EMA. I like it here for a return trip to 46.
NARI:
Until the past 3 days, NARI was clearly the weakest of these 7 stocks. However, the volume that accompanied the HUGE gap and continued buying last Thursday suggests we may have seen a reversal on the chart. Any light volume pullback to the low-60s could represent an opportunity.
If you're more interested in a bpullback candidate that could bounce with a strong DJUSAM, I highlighted this one in the EB Weekly Portfolio Report as a Model Trade Setup last night:
ZBH:
It looks pretty clear to me that 125 is THE key price support level on the chart. If the DJUSAM reverses and moves higher in the near-term, it would be a great opportunity for ZBH to do the same.
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.
Monday, August 7:
KKR, PLTR, OKE, BNTX, IFF, CTRA, TSN, SWKS, CE, LCID, VTRS, ACM, WTRG, HSIC, PARA, SWAV, PRI, FIVN, ELAN, FSK, TDC, RNG, FRPT, AYX, GOGO, CHGG, BYND
Tuesday, August 8:
LLY, UPS, ZTS, DUK, TDG, LI, DDOG, GFS, CPNG, SLF, GOLD, FNV, RIVN, TTWO, EC, QSR, HZNP, BR, EXPD, RPRX, PODD, FLT, SMCI, EDR, FOXA, WMG, J, FOX, BSY, AKAM, AXON, TECH, JHX, TWLO, CELH, TOST, DAR, WES, QGEN, FNF, ARMK, TPG, NRG, INGR, DOCS, SEE, NXST, MASI, ATKR, DUOL, UPST, QDEL, PRGO, HAE, SQSP, LYFT, CPRI, FLYW, UA, KLIC, HL, TWNK, LZ, MARA, MQ, ARRY, ENR, RPD, AMC, BMBL, CRCT, OLPX, TGLS, RDNT, VCYT, ZIP, LRN, VZIO, MODN, EVBG, LGND, IRBT, CRNC, APPS
Economic Reports
None
Happy trading!
Tom