EB Daily Market Report - Thursday, March 14, 2024

Tom Bowley - March 14, 2024

Executive Market Summary

Futures were up slightly prior to the February PPI being released
February PPI suggested stubborn inflation as both the headline and core numbers were above consensus estimates
Shockingly - at least to me - growth stocks are crushing value stocks today, despite the 10-year treasury yield ($TNX) jumping 10 basis points to 4.29%
Large cap growth stocks (IWF, +0.12%) have held up well, while large cap value (IWD, -0.82%) reverses recent absolute and relative gains
Crude oil prices ($WTIC, +1.29%) remain hot, threatening to close at its highest level since early November
Energy (XLE, +0.73%) is easily today's best-performing sector, while technology (XLK, +0.16%) is the only other sector in positive territory
Software ($DJUSSW, +1.16%) is helping to hold up technology as semiconductors ($DJUSSC, -2.04) are weak
Meanwhile, defensive groups real estate (XLRE, -1.75%), utilities (XLU, -0.61%), and consumer staples (XLP, -0.76%) again find themselves lagging the benchmark S&P 500 ($SPX, -0.32%)
After gapping a bit lower, the Volatility Index ($VIX, +4.51%) has been rising steadily throughout the session
Microsoft (MSFT, +2.38%) is setting yet another all-time high, boosting software
Alphabet (GOOGL, +1.97%) is up for the 6th consecutive day, lifting internet

Market Outlook

Well, copper ($COPPER) made that closing breakout on Wednesday, clearing that 4.00-4.05 price resistance zone from the weekly chart that I illustrated yesterday. Now let's look at COPPER on a daily chart:

Even on this daily chart, you can see the fairly tight positive correlation between COPPER and the S&P 500. Knowing this tendency to move in tandem with the S&P 500, how can we view this breakout as anything other than bullish?

Sector/Industry Focus

We saw a morning gap lower in the QQQ on Wednesday, followed by morning selling, eerily similar to what happened during the latter part of options-expiration week in February (and into the week following options-expiration week). Surprisingly, after a hot PPI report, the QQQ gapped UP today. But what followed? Morning weakness. Will it morph into something more significant. Honestly, it wouldn't shock me at all. In addition to the "kitchen sink" being thrown at the bulls lately, the 10-year treasury yield ($TNX) is soaring today, nearly reaching 4.30% just 4 days after falling to 4.04%. Will THIS matter? Those with a glass half full will argue that the QQQ is going up and, at worst, consolidating, while short-term secondary indicator after short-term secondary indicator fails to poke any holes in the QQQ.

As bullish as I am, it's hard to fathom the strength of this bull market. Yet here we are. Thus far, the only thing the bears have to show for all these warning signs is a QQQ 20-day EMA test. Check this out:

Is the 20-day EMA test as bad as it's going to get? Even the two times where we saw the QQQ drop below its 20-day EMA, it recovered quickly.

ChartLists/Strategies

Here are two stocks pulling back and nearing MAJOR support. Check them out:

AVAV:

Big volume breakout with earnings and on MASSIVE volume. Will gap support near 150 hold? My guess is yes.

KFY:

I see gap support just below 63 and the current rising 20-day EMA at 62.81. Also, the day of earnings, KFY gapped higher, failed, and hit an intraday low of 63.31, which is when buyers came in to support the stock. So it certainly seems to me that this area near 63 is a solid reward-to-risk entry area. If the market does show weakness ahead, KFY is at least a stock where risk can be managed quite effectively, barring a be gap lower one day. That risk, however, exists on ANY stock you hold overnight.

My target would be a return trip near 70.

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.

Thursday, March 14:

ADBE, DG, ULTA, WPM,BEKE, DKS, SMAR, PD, GIII, MOMO, CSIQ

Friday, March 15:

JBL, BKE

Economic Reports

Initial jobless claims: 209,000 (actual) vs. 215,000 (estimate)

February PPI: +0.6% (actual) vs. +0.3% (estimate)

February Core PPI: +0.3% (actual) vs. +0.2% (estimate)

February retail sales: +0.6% (actual) vs. +0.7% (estimate)

February retail sales less autos: +0.3% (actual) vs. +0.4% (estimate)

February business inventories: +0.0% (actual) vs. +0.3% (estimate)

Happy trading!

Tom