EB Daily Market Report - Wednesday, March 13, 2024
Executive Market Summary
- Futures were mixed overnight and at the opening bell
- We've seen relative strength in small- and mid-caps throughout the session, though it's been a lot of sideways action since the first hour or two
- Energy (XLE, +1.69%) and materials (XLB, +0.95%) have led today's action throughout
- Meanwhile, technology (XLK, -0.85%) has lagged as Tuesday's strength now appears like maybe a one-day wonder
- Commodities are mostly higher as gold's ($GOLD, +0.68%)
- The 10-year treasury yield ($TNX) is up 4 basis points, threatening that key 4.20% yield resistance; if the TNX continues to rise, it could spook equities in the very near-term, helping the market makers accomplish their goal
- Tomorrow morning, we'll get the latest inflation data as the February PPI will be released at 8:30am ET
Market Outlook
I'm watching copper's ($COPPER) movement quite closely right now as this commodity is closely tied to the strength or weakness of global economies. It's an industrial metal that moves higher and lower as demand increases/decreases. First, check out the long-term weekly chart of $COPPER and the positive correlation with the S&P 500 in the panel beneath:
Note, first of all, that the blue-shaded area in the bottom panel represents strong positive correlation and we see a lot of activity in this area over the past two decades. The red-shaded area represents strong inverse, or negative, correlation and we rarely see activity here. So clearly, there's a long-term connection between the price of copper and the direction of our benchmark S&P 500.
It looks to me like a symmetrical triangle has broken out to the upside, suggesting further gains ahead for copper. If that's the case, it would be a big bullish argument for the S&P 500 as well. The S&P 500 struggled from 2014 through early 2016 and check out what happened to copper during that time. It broke down from a very similar pattern, leading to lower copper prices and a difficult U.S. stock market. For further confirmation, I'd like to see copper break above the 4.00-4.05 range, but for now, I'd say this chart favors the bulls.
Sector/Industry Focus
I can't be sure what might happen over the course of the next few days to a week with March monthly options expiring, but I do know that market makers will try anything to bring prices down after a steady rally like the one we've seen in 2024. During the Live Trading Room session today, I showed everyone my Excel spreadsheet that highlighted the selling around this same options time last month. Check out this QQQ chart:
Market makers used their "superpowers" to gap prices lower each day, effectively holding down the price of the QQQ, despite the obvious accumulation that took place during this period from 10:00am through 4:00pm ET.
I put nothing past the market makers during options expiration week and into the first couple days of the following week. Remember, if options holders decide to exercise their options and buy the underlying stock, market makers remain on the hook, having to sell those shares short. That's why options-related activity moves into the early part of the following week.
I mention this because today the QQQ gapped lower and struggled during the first 30 minutes of action, eerily similar to what took place last month. Let's see how this plays out over the next 3-4 trading days.
ChartLists/Strategies
Let's hold off on adding any new stocks on the long side as market makers have incentive to move prices lower. It simply adds to the already heightened risk of trading right 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.
Wednesday, March 13:
LEN, DLTR, WSM, PATH, S
Thursday, March 14:
ADBE, DG, ULTA, WPM,BEKE, DKS, SMAR, PD, GIII, MOMO, CSIQ
Economic Reports
None
Happy trading!
Tom