EB Daily Market Report - Monday, August 28, 2023

Tom Bowley - August 28, 2023

TP Live - Tuesday, August 29th Cancelled

I'm in Tampa, FL dealing with a family medical matter and a hurricane is about to chase me back to the north. My schedule could be quite volatile in the near-term, so I'll use the DMR as a means to communicate any changes in our schedule. Because I'll be traveling home all day tomorrow, there'll be no TP Live show on Tuesday morning. At this time, I believe both the Wednesday TP Live and Wednesday Live Trading Room, as well as Thursday's TP Live will occur as scheduled. If there are any changes, I'll let you know with as much notice as possible. I appreciate your understanding.

ChartList Update

The 3 Stock Portfolios have been updated on our website. They are:

Model Portfolio
Aggressive Portfolio
Income Portfolio

I've annotated every chart in these 3 portfolios from a longer-term perspective using weekly charts.

Executive Market Summary

Futures were higher across the board overnight and we saw gaps higher on our major indices
We've weakened intraday, but continue to hold onto gains
All 11 sectors are higher, but leadership is mixed; communication services (XLC, +0.96%) and real estate (XLRE, +0.93%), an aggressive sector and a defensive sector, respectively, are leading the action
Transports ($TRAN, +0.63%) cleared 7-day price resistance and neared its 20-day EMA before failing
Investment services ($DJUSSB, +1.06%) is also clearing recent highs, but just now approaching its key 50-day SMA and 20-day EMA; a break above both would be bullish
Crude oil ($WTIC, +0.36%) continues to straddle the $80 per barrel level
The 10-year treasury yield ($TNX) is down 3 basis points to 4.21%, perhaps aiding U.S. equities
3M (MMM, +5.08%) is one of today's top-performing stocks after announcing it reached a $5.5 billion deal to settle lawsuits

Market Outlook

CORRECTION: On Friday, I posted annualized returns for each day on the S&P 500, starting with Monday, 8/31. There's only one problem. Today is 8/28, not 8/31. I apologize for the error and wanted to provide you the corrected numbers:

Monday, 8/28: -9.68%
Tuesday, 8/29: +26.19%
Wednesday, 8/30: -30.53%
Thursday, 8/31: +10.85%
Friday, 9/1: +26.69%

The best day is September 2nd, which falls on a Saturday this year. Its annualized return is +62.42% and underscores the historical probability that we'll see more strength later this week. Consider this, however, in conjunction with the current technical picture of our key sectors below as I use seasonality as a SECONDARY indicator, not a PRIMARY one.

Sector/Industry Focus

In the very near-term, the bulls and bears are battling it out. For me, the question is whether we've already hit a summer low or if we still have another September low ahead. One key short-term signal will be if our critical aggressive sectors can negotiate the 20-day EMA/50-day SMA, particularly this week since history favors bullish action to open September. Here are daily charts of technology (XLK), consumer discretionary (XLY), and communication services (XLC):

XLK:

The PPO is finally turning higher, which is a bullish development, because even if we move lower again, a positive divergence is likely to develop. But, from a bearish perspective, the AD line remained flat during this past rally attempt. The short-term remains dicey, but I remain bullish both the intermediate- and long-term.

XLY:

The key for XLY will be regaining its now-declining 20-day EMA. Should it do this, it would begin to look more and more like a period of sideways consolidation leading us up to the more bullish Q4.

XLC:

I can see bullish wedges in all 3 charts, but this one was much easier for me to visualize, because it had 3 or more tests on both of its trendlines. A move back up through 67 would likely lead to much more bullishness here.

ChartLists/Strategies

From the Raised Guidance ChartList (RGCL), here are two stocks that need to get moving higher from current price or run the risk of a very significant price breakdown:

PLCE:

PLCE fell with the other retailers, but its volume has been below average. And while it's down today, one subtle bullish development is that it printed a higher daily high after 6 consecutive lower daily highs. Is this the beginning of a reversal? It's quite possible.

EAT:

The volume after its recent earnings report was heavy, but volume is now dissipating as it tests a major price support level. I would expect a bounce from here. If it doesn't, a very tight stop can be used.

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 28:

HEI

Tuesday, August 29:

PDD, BMO, BNS, HPQ, NIO, BBY, ZTO, SJM, CTLT, DCI, PVH, BOX, AMBA

Economic Reports

None

Happy trading!

Tom