EB Daily Market Report - Quick Update - Wednesday, October 18, 2023
ChartLists Updated
The following ChartLists have been updated on our website and are now available for your viewing/downloading pleasure:
- Strong Earnings (SECL)
- Strong Future Earnings (SFECL)
- Raised Guidance (RGCL)
- Bullish Trifecta (BTCL)
- Short Squeeze (SSCL)
Market Update
Really not much has changed. The sideways chop continues and I didn't see the need in writing another full-blown DMR. Let me just highlight a couple key thoughts for now.
Earnings
Earnings continue to accelerate and we'll get the latest quarterly results from Tesla (TSLA) and Netflix (NFLX) after the close today. One stock leads its peers and the other clearly lags its peers:
TSLA:
The AD line is very strong and TSLA has been outperforming its auto peers ($DJUSAU). I love TSLA. I can't tell you where it'll open tomorrow, but I feel rather comfortable that TSLA will remain a leader for many years to come. If it does fall short of estimates or warns about Q4, lower prices would be a welcome sight for anyone looking to add or build a position in TSLA.
NFLX:
Talk about the polar opposite of TSLA! NFLX shows a falling AD line and awful relative strength. It now sits at a 52-week relative low vs. its internet peers ($DJUSNS) and internet has been one of the strongest areas of the stock market. What the heck is wrong with NFLX? I don't know, but it Wall Street is tossing the stock, so am I.
The Tale of Two Earnings Reports.
Volatility ($VIX)
ANY TIME the Volatility Index ($VIX) is hovering around the 20 level, I'm going to be nervous, because I know what it can mean for the VIX to shoot above 20 and the impact that it can have short-term on equity prices. We have threatened several times now to break above 20 and we've yet to do so. If it happens, it could be the start of a capitulation to mark a major S&P 500 bottom. Check it out:
The good news is that each time the VIX has climbed to the 20 level, a short-term S&P 500 bottom has printed and the VIX reverses off of 20 resistance. But I can tell you that if the VIX sustains a move above 20, it is VERY UNLIKELY that we'll see a bottom print on the S&P 500. Instead, I would expect a very rapid short-term selloff - it could be of the scary variety where it just drops without much buying to help stave off lower prices. I call it market makers "going on vacation". This doesn't change my longer-term year end view of the S&P 500, but it sure as heck changes my short-term view if the VIX surges into today's close.
Please be careful if you're a short-term trader. Selling short is always an option, but not one that I use when I believe a longer-term secular bull market remains the big picture guiding force.
Happy trading!
Tom