EB Daily Market Report - Tuesday, March 19, 2024

Tom Bowley - March 19, 2024

Executive Market Summary

Futures were weak overnight and our major indices gapped lower and struggled during the first hour or so
Then we saw a reversal mid-morning as buyers took over amid a steady rise in our major indices
One catalyst was a falling 10-year treasury yield ($TNX), which has dropped 4 basis points today, the first decline since rates rose from the 4.04% level
A robust February housing starts and building permits report this morning has aided the rally
The Dow Jones U.S. Home Construction Index ($DJUSHB, +1.74%) has been strong throughout the day, lifting consumer discretionary (XLY, +0.63%)
Energy (XLE, +0.98%) remains strong as well, with crude oil prices ($WTIC, +0.97%) reaching $83.50 per barrel, the highest level since early November
Most other commodities are lower on the session
Semiconductors ($DJUSSC, -0.62%) is testing its 20-day EMA for the first time in a month
Super Micro Computer (SMCI, -11.16%) is down after announcing a secondary offering

Market Outlook

I'm awaiting the Fed announcement on Wednesday, with little idea what Fed Chief Powell might say. I do want to mention, however, that we tested a very key 10-year treasury yield ($TNX) resistance at 4.35% and a breakout above this level could be the catalyst to spook stock traders and begin a more meaningful decline to close out March. But if Powell decides to stick with and discuss prior Fed themes, like 3 interest rate cuts are coming or that they're not worried about the slight uptick in inflation, it would likely be the catalyst to send yields falling and stocks to more all-time record highs.

If yields do remain in check after the announcement tomorrow, this potential reversing (and bullish) piercing candle may be marking a key low in the IWM, the ETF that tracks the small cap Russell 2000:

Sector/Industry Focus

As I mentioned above, the semiconductor group ($DJUSSC) is testing its rising 20-day EMA and if the NASDAQ 100 ($NDX) wants to remain in a strong uptrend, it's quite likely the DJUSSC will need to hold onto this support:

The AD line is very strong, so I don't see any kind of significant distribution taking place. If the 20-day EMA is lost, I've highlight a trading range that covers the big gap from the latter half of February. An unwinding wouldn't be unhealthy at this point, but given the secular bull market in play, I wouldn't assume that type of selling will take place.

ChartLists/Strategies

It's probably not a great idea to get too aggressive ahead of the Fed announcement tomorrow. We certainly could go either way. March can be problematic for bull market advances and we've certainly been struggling on our major indices the past 1-2 weeks.

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 19:

TME, ZTO, CNM, XPEV, HQY, CAL

Wednesday, March 20:

PDD, MU, GIS, PUK, BNTX, HTHT, FIVE, KBH, OLLI, SIG, WOR, JKS, GES

Economic Reports

FOMC meeting begins

February housing starts: 1,521,000 (actual) vs. 1,449,000 (estimate)

February building permits: 1,518,000 (actual) vs. 1,500,000 (estimate)

Happy trading!

Tom