EB Daily Market Report - Tuesday, March 5, 2024
Big April Surprise!
Get ready! We've got a big announcement next week as we've planned something special in April for our entire EarningsBeats.com community ! Stay tuned....
Executive Market Summary
- Futures were lower overnight and our major indices gapped down at the opening bell
- There's been distribution across the Dow Jones, S&P 500, and NASDAQ 100
- Meanwhile, both small caps and mid caps are close to where they were at the open
- Cryptocurrencies are down big after their recent surge to the upside; bitcoin ($BTCUSD, -8.03%)
- Most commodities are lower, though gold ($GOLD, +0.70%) is adding to its recent gains - see more on gold below
- Energy (XLE, +0.54%) and consumer staples (XLP, +0.15%) are showing relative strength, which is somewhat typical of secular bull market pullbacks
- Technology (XLK, -2.89%) is being hit the hardest today as software stocks ($DJUSSW, -3.76%) appear to be rolling over - and it may just be getting started
- One of our portfolio software stocks, CrowdStrike Holdings (CRWD, -6.30%), has fallen to test its 50-day SMA ahead of this afternoon's quarterly earnings report; I expect solid numbers as CRWD has been a leader, but let's see what kind of market reaction CRWD gets
Market Outlook
Gold ($GOLD) has a tendency to perform well during the first couple months of year - at least based on seasonality. Check out this 20-year GOLD relative seasonality chart (vs. the S&P 500):
The Volatility Index ($VIX) is up 9% today as well, and GOLD performs its best when the VIX is on the rise. It tends to show leadership when the VIX moves above 20 and continues to rise. The fear associated with that VIX rally is what drives the rotation into GOLD.
Just keep one thing in mind. While GOLD may perform well over short periods of time, the long-term relative trend has been lower. This is a chart that you should keep handy to remind yourself of GOLD's typical inability to keep pace with the S&P 500 during bull market advances:
The blue circle in the GOLD price chart clearly shows that GOLD is trending higher, but check out the $GOLD:$SPX relative price action in the panel below. The relative strength of GOLD has been falling for 13 years! So while gold bulls can rejoice in setting new highs, the problem is that they'd make a whole lot more money by investing in the S&P 500.
Again, I'd completely avoid GOLD, despite the recent strength.
Sector/Industry Focus
One area that I touted for 2024 is banking ($DJUSBK). I believe it's important to acknowledge that while most areas of the stock market have sold off the past couple days (the final hour yesterday, plus today), we are definitely seeing some of that selling result in proceeds that are finding their way into banks. Check out this intraday chart of the NASDAQ 100, S&P 500, and the $DJUSBK:
This is reflective of only the past 24 hours or so, but rotation has to start somewhere. This definitely looks like the start of the March weakness in our major indices. When this selling is complete, I fully expect to see the secular bull market advance resume.
ChartLists/Strategies
It's probably best to put new trades on hold for now.
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.
Tuesday, March 5:
CRWD, TGT, ROST, FERG, FNV, NIO, BOX, JWN, BASE, SEAT, CRCT
Wednesday, March 6:
JD, BF/A, CPB, DSGX, THO, ANF, KFY, FL, VSCO, INFN
Economic Reports
February PMI composite: 52.5 (actual) vs. 51.4 (estimate)
January factory orders: -3.6% (actual) vs. -3.0% (estimate)
February ISM services: 52.6 (actual) vs. 53.0 (estimate)
Happy trading!
Tom