EB Daily Market Report - Wednesday, June 5, 2024

Tom Bowley - June 05, 2024

Spring Special

Thanks to those that renewed under our Spring Special and who participated in our "Get To Know You" series annual giveaway! We hope you enjoyed getting to know our team members over the past two weeks. We're thrilled to announce our randomly selected annual membership winner:

David F. from California, USA. Congratulations David!

Our team will be in touch to extend your membership!

Upcoming Schedule

I will be traveling this weekend to my annual family reunion leaving on Thursday AFTER Trading Places LIVE and returning on Monday. This will cause a slight, temporary disruption in a few of our services. This is what will change:

I will not be updating ChartLists this weekend. Instead, I'll do a 2-week "catchup" on ChartLists next weekend
There will be no Weekly Market Recap video nor Fab 5 video
The Weekly Market Report typically provided on Mondays will likely be a very abbreviated version

Here's what will not change:

Trading Places LIVE on Thursday will be broadcast on YouTube - this show must go ON!
The Weekly Portfolio Report will likely be prepared and sent out on Friday as usual
John Hopkins will provide a brief market update on Friday as he typically does

Executive Market Summary

Futures were higher overnight and our major indices gapped up at the opening bell
After brief selling in the first 30 minutes, we've seen mostly buying as the S&P 500 and NASDAQ 100 both set new all-time highs intraday; let's see if these records carry into the close
Nearly all commodities are gaining ground today as crude oil ($WTIC, +1.23%) jumps back above $74 per barrel
The 10-year treasury yield ($TNX) continues to tumble, dropping another 5 basis points to 4.29% - Fed, are you listening?
7 sectors are higher, 4 are lower; technology (XLK, +2.01%) is strong, led by semiconductors ($DJUSSC, +4.40%); NVIDIA Corp (NVDA, +4.82%) is at the $3 trillion market cap level, slightly trailing Apple (AAPL, +0.77%) for the 2nd spot behind Microsoft (MSFT, +1.48%)
Defensive sectors are trailing badly today
CrowdStrike Holdings (CRWD, +11.70%) is having an excellent day after topping quarterly estimates.

Market Outlook

Today is a PERFECT example of why I don't jump back and forth on my thought that we remain in a secular bull market. Yesterday, I pointed out short-term concerns, but remaining VERY BULLISH the big picture. I don't bet against a secular bull market until I've been beaten over the head by warning signs and my secondary indicators are or nearly unanimous in sending bearish signals. Here we are, just one day later, and small caps are surging off the gap support I provided yesterday and our two key indices, the S&P 500 and NASDAQ 100, are both setting all-time highs. Calling tops, AND ACTING ON THEM, in a secular bull market is many times more dangerous than staying long.

Check out the charts today on the S&P 500 and NASDAQ 100:

S&P 500:

NASDAQ 100:

The strength that we're seeing today doesn't simply erase the warning signs that I've discussed recently. We should continue to keep those signals in the back of our minds. However, it is a reminder why I always give the benefit of the doubt to the bulls during a secular bull market.

Sector/Industry Focus

Below I explain a trade that I made today during our live trading room on Celestica (CLS). I liked its industry group, electrical components ($DJUSEC), moving back up and reversing. CLS had the highest SCTR score on our SECL of all stocks in the DJUSEC. It's also a Model Portfolio stock. Anyhow, here's the chart on the DJUSEC:

The channel bounce was nice, as was the reclaiming of the 50-day SMA. Prior breaches of this 50-day SMA saw very quick reversals and that's what I was looking for here. Remember, we're in a secular bull market and I'm playing by secular bull market rules. These rules suggest that we look for reversals off of temporary downtrends.

ChartLists/Strategies

During today's LIVE trading room, I pointed out that one of our Model Portfolio stocks that fallen back to test 20-day EMA support, actually trading just beneath its 20-day EMA at Tuesday's close. Today, it moved back above that key moving average and I entered a solid position at 53.63. Here's the chart, showing the pullback and today's rally:

The PPO is very bullish here, so I'd look for 20-day EMA tests to offer up great support and, in this case, it did.

Yesterday, I said I expected CrowdStrike Holdings (CRWD) to move higher with earnings. It certainly was not a guarantee, but relative strength here was very strong, so a revenue beat ($921.0 million vs. $904.8 million) and EPS beat ($.93 vs. $.89) is what I was looking for and what we saw. Here's today's market reaction:

We should see that AD line take a big jump, assuming that CRWD remains strong the last 30 minutes of today's session. It's a big volume day and CRWD is trading close to its high right now.

If you like these "high reward, high risk" gambles with earnings, you might check out G-III Apparel (GIII):

GIII just broke to a 5-year relative high vs. its clothing & accessories peers ($DJUSCF). Its AD line is soaring and I see significant price resistance near 36. I won't be surprised to see a very strong report and a gap higher to perhaps test this level. Obviously, this is no guarantee and GIII could flop with its earnings. But my guess is that we're going higher here. GIII reports its latest quarterly results TOMORROW MORNING. So we'll likely see a big change at the opening bell. I've taken a small position into earnings, but just a reminder that this is a VERY HIGH RISK trade.

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, June 5:

LULU, DLTR, BF/A, CPB, FIVE, THO, SMAR, OLLI, SMTC, VSCO

Thursday, June 6:

IOT, SJM, DOCU, NIO, TTC, MTN, CIEN, BRZE, ABM, GIII

Economic Reports

May ADP employment report: 152,000 (actual) vs. 173,000 (estimate)

May PMI composite: 54.5 (actual) vs. 54.4 (estimate)

May PMI services: 54.8 (actual) vs. 54.8 (estimate)

May ISM services: 53.8 (actual) vs. 50.7 (estimate)

Happy trading!

Tom