EB Daily Market Report - Friday, September 8, 2023

Tom Bowley - September 08, 2023

Executive Market Summary

Futures were relatively flat at the open and the NASDAQ 100 showed relative strength in the morning session
After opening weak, small caps (IWM) have shown relative strength in the past few hours
Crude oil ($WTIC, +0.60%) remains strong and above $87 per barrel, while most other commodities decline
The 10-year treasury yield ($TNX) is flat at 4.26%
Energy (XLE, +0.98%) and utilities (XLU, +0.85%) are rising today, while real estate (XLRE, -0.73%) and industrials (XLI, -0.69%) lag; most all other sectors are close to the zero line
Semiconductors ($DJUSSC, -1.00%) is one of those industries that started the day in positive territory, but now appears ready to extend its significant weakness into a 3rd consecutive day
Kroger (KR, +4.45%) is the leading stock in the S&P 500 after beating earnings consensus; KR did miss revenue estimates, however - more on KR in ChartLists section below
Next week, we'll get the latest on inflation as the August CPI and August PPI will be released on Wednesday and Thursday, respectively

Market Outlook

If we step back and look at the monthly charts, our major indices remain quite bullish. Check out these four charts:

Dow Jones

S&P 500

NASDAQ 100

Russell 2000 (IWM)

These charts need no annotations. I know we all want to jump to conclusions based on what happened yesterday or last week, but I find it very helpful to step away from the day-to-day volatile action and focus on what the big picture is telling me. I see 4 bullish charts.

Sector/Industry Focus

We've seen a big move higher in U.S. stocks in 2023, but not every group has participated. Here are just a few that haven't participated, but are currently printing positive divergences. Perhaps a reversing candle soon will get them jumpstarted:

Medical Equipment ($DJUSAM)

Key 2023 price support approaching around 2330.

Aluminum ($DJUSAL)

I looked at a 5-year chart and key multi-year support from 108-115 has already been lost. Also, the DJUSAL has been downtrending for 18 months now with a weak AD line. It seems a bit early to be thinking bottom here.

Personal Products ($DJUSCM)

The DJUSCM doesn't appear to be under any accumulation on this steep price decline. Rather, everyone seems to be running for the exits. Even a short-term rebound wouldn't make me feel overly confident with the look of this chart.

Restaurants & Bars ($DJUSRU)

There is one significant positive for restaurants. It's actually still in an uptrend in 2023 if you consider the main price support in this uptrend to be 2410 or so. Unfortunately, I really like to see positive divergences form with other bullish corroborating factors suggesting a long trade makes sense. In all four of these cases, I only see the DJUSAM approaching a key support level. It would therefore be difficult to trust any of them - especially as we prepare to battle the 2nd half of September.

ChartLists/Strategies

For the second straight quarter, Kroger (KR) gapped down after its quarterly results were released. And for the second straight quarter, we're seeing a significant rally off of those gap downs:

I love long hollow candles on heavy volume. It's a signal to me that a stock is under significant accumulation. Food retailers & wholesalers have been strong in recent months and KR could just be starting to show relative strength vs. its peers. It's a defensive stock, but there are a TON of worse stocks to own right now. I believe KR is moving back towards key short-term resistance at 50 and, ultimately, its all-time high near 60. The 2.57% dividend won't hurt in the meantime.

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.

Friday, September 8:

Monday, September 11:

ORCL, CASY

Economic Reports

July wholesale inventories: -0.2% (actual) vs. -0.1% (estimate)

Happy trading!

Tom