EB Daily Market Report - Wednesday, February 28, 2024

Tom Bowley - February 28, 2024

Executive Market Summary

Futures were lower overnight and all of our major indices gapped down at the opening bell
At last check, these indices have mostly held up throughout the trading day
Sectors are mixed today, 5 higher and 6 lower; real estate (XLRE, +1.38%) is leading to the upside and communication services (XLC, -0.78%) showing relative weakness
Internet stocks ($DJUSNS, -1.29%) are continuing to weigh on the XLC, but let's keep perspective in mind; the DJUSNS made a huge push higher from late-October through early-February
Gambling stocks ($DJUSCA, +0.80%) are turning higher and could be primed for an upcoming breakout - see Sector/Industry Focus below
Bitcoin ($BTCUSD, +5.92%) is having another strong day, rising above 60000 for the first time since late-2021
The 10-year yield ($TNX) is down 4 basis points to 4.27%, but I'd consider the TNX to be in an uptrend, unless the 4.20% yield support level is violated
The Dow Jones is getting a boost from Boeing (BA, +2.62%), which is having one of its best days of 2024

Market Outlook

I would pay a lot of attention to rising 20-week EMAs. The small cap IWM already has successfully tested its rising 20-day EMA. Below is a weekly chart of our major indices, each with its rising 20-week EMA provided:

The green arrows show the potential of downside action in March, in my opinion. I have NO idea of whether we'll actually see the selling necessary to take us to these moving averages, but within the secular bull market we could definitely see prices drop. If you're on the sideline and wondering where might be a solid reward-to-risk entry into U.S. equities, 20-week EMA tests is exactly where I'd suggest.

Sector/Industry Focus

Gambling stocks ($DJUSCA) had a big run from October 2023 through mid-February 2024, but we've since been seeing rotation away from the group. Here's a chart showing what I am expecting to see develop on the DJUSCA:

I am following the channel, which has been in place now for the past 4-5 months. Buying at the bottom of the channel and selling at the top makes sense to me, until this channel breaks.

ChartLists/Strategies

I wanted to provide a few more stocks from our Strong Earnings ChartList (SECL) that look really solid to me:

FTAI:

FTAI has been an exceptionally strong stock over the past year and it's shown few signals that the uptrend is about to end. Gap support is at 54.48 and the rising 20-day EMA is at 54.24 and will soon be up to gap support. Further selling into this area would represent nearly a 10% pullback from the price high near 60.

SEM:

After a nice rally with quarterly earnings results, SEM has pulled back into a zone that's provided excellent support/resistance over the past year. Also note that the rising 20-day EMA, currently at 26.91, is in the middle of this support zone as well. The AD line isn't great, so I'd willing to let this one go if this support zone does not hold.

SIG:

Cup with handle? Looks like one to me and we're seeing a hammer print today on the key rising moving averages. AD line is strong and today's action will only strengthen it further. A close above 108 confirms this bullish continuation pattern.

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.

Wednesday, February 28:

CRM, RY, TJX, SNOW, MNST, HPQ, VST, EDR, VTRS, SUZ, NTNX, OKTA, BLD, PSTG, SRPT, EME, SQM, NRG, VIPS, NTRA, IEP, DUOL, DV, AAON, ADT, NXST, GTLS, MARA, SRCL, MMSI, SQSP, AAP, KTB, SHOO, AI, PDCO, EVTC, FTDR, TGTX, DQ, WRBY, MGNI, ACMR, TASK

Thursday, February 29:

CRM, RY, TJX, SNOW, MNST, HPQ, VST, EDR, VTRS, SUZ, NTNX, OKTA, PSTG, BLD, EME, SRPT, SQM, NRG, VIPS, NTRA, DCI, IEP, DUOL, DV, MARA, ADT, GTLS, NXST, SRCL, MMSI, SQSP, IOVA, AAP, KTB, AI, IQ, SHOO, NARI, PDCO, FTDR, TGTX, DQ, WRBY, MGNI, ZUO, ACMR, TASK

Economic Reports

Q4 GDP (2nd estimate): +3.2% (actual) vs. +3.3% (estimate)

Q4 PCE: +3.0% (actual) vs. +2.8% (estimate)

January wholesale inventories: -0.1% (actual) vs. +0.1% (estimate)

Happy trading!

Tom