EB Daily Market Report - EXITING ALL PORTFOLIO STOCKS TODAY - Wednesday, August 14, 2024

Portfolio Changes and Delay of DRAFT

First, I'm not thrilled with a few of our sustainability ratios right now. The QQQ:SPY ratio has barely rallied while the S&P 500 has regained 61.8% of its losses (key Fibonacci retracement level). The XLY:XLP ratio is even more bearish, in my view, having just recently hit a 52-week low. The relative rebound there has been uninspiring, quite frankly. The IWM:IWD ratio is perhaps slightly better than the other two, but that's still not making me feel very bullish at the moment. These ratios do not guarantee us anything. They simply help me analyze the risk of taking long positions. I'm not comfortable AT ALL in doing so just yet. We have critical economic reports over the next couple days, led by a fresh initial jobless claims number on Thursday morning, along with retail sales. Then Friday, we'll see housing starts and building permits. There are others as well.

I'm of the opinion that the economy is the bigger deal, not inflation. I'm not saying inflation isn't important, but we just escaped two key inflation reports and my sustainability ratios are barely budging back to the upside. Why? Well, it could be because Wall Street believes we're heading for further proof of economic weakness. Everyone has to do what they feel is most comfortable, I'm just not really trusting this rally. The Volatility Index ($VIX) is definitely one bullish signal, so it's not all bearish.

I don't want to take any chances right now.

Portfolio DRAFT

Currently, our Portfolio DRAFT is scheduled for tomorrow after the close. I am DELAYING the draft until next week at a date and time to be announced later.

Current Portfolios Will End TODAY

Because of current market uncertainty and the lack of evidence of sustainability, we will be closing our current portfolios as of today's closing price. That means we will EXIT ALL STOCK POSITIONS based on today's close. We will not wait to close out at tomorrow's opening price. If you're in an entire portfolio or trading individual stocks in the portfolio, feel free to hold or exit, whatever is best and most comfortable for you. I would rather sit out these next few days and have no risk. Obviously, the stock market has rallied for more than a week now and it may continue to do so, especially if economic reports show little or no weakening in the economy. The decision to hold or exit is completely up to you.

After taking on big blows in our portfolios as growth stocks were hammered, I believe this rally has helped narrow the gap between our portfolios performance and that of the S&P 500. I don't want to take a chance of another rout of growth stocks.

Executive Market Summary

• Futures were relatively flat overnight and searched for direction after the July CPI report showed inflation at the consumer level came in as expected at +0.2%
• The initial trading bias was higher, though, as our major indices did manage to gap up
• The Volatility Index ($VIX, -8.17%) continues to fall and is now beneath a key level at 17; prior bear markets never saw the VIX close back beneath 17 after the initial bout of selling - let's see how the VIX closes today
• The 10-year treasury yield ($TNX) fell 2 basis points to 3.83% in reaction to the in-line CPI report
• Gold ($GOLD, -1.12%), silver ($SILVER, -1.57%), and crude oil ($WTIC, -1.58%) all were leading commodities lower on the session
• Leadership has shifted today away from the most aggressive sectors as financials (XLF, +1.06%) and energy (XLE, +0.61%) are leading today's action
• Meanwhile, communication services (XLC, -0.70%) and consumer discretionary (XLY, -0.55%) are the primary laggards
• Insurance companies are strong as both Progressive (PGR, +4.95%) and Allstate (ALL, +4.18%) break to new 52-week highs
• Growth (IWF, +0.13%) vs. value (IWD, +0.34%) has risen the past 4 sessions, but that streak will likely be ended today, unless we see significant rotation into growth by 4pm ET

Market Outlook

I want you to see the sustainability ratios that I mentioned above and they've really had a poor showing during this overall market rebound. They're mostly going higher, but they should be moving up much more rapidly and that concerns me:

Fibonacci retracement shows the S&P 500 has rebounded 61.8% of its decline. None of our sustainability ratios have even approached the FIRST Fibonacci retracement level of 38.2%. This tells us that aggressive areas of the market were leading us to the downside in a big, big way. The recovery, however, reeks of a market that's worried about further economic deterioration.

This is my primary reason for being extremely cautious right now. Keep in mind that the absolute WORST time of the calendar year for most growth stocks is from August 15th through September 30th. Today is August 14th. Throw is the Presidential Election uncertainty and hopefully you can understand my trepidation right now.

Sector/Industry Focus

One other piece of economic evidence that favors a potential slowdown involves copper prices ($COPPER). This is an industrial metal that has a history of tracking global economic supply and demand. Prices move lower as demand wanes. Check out the huge drop and relatively minor bounce that we've seen over the past week or so:

If we just look at the move lower since the July high, which would correspond with the timing of our major index decline, it's quite apparent that we've seen little pick up in demand. Listen, I don't have any sort of guarantee as to where the stock market is going, but these are valid technical and economic clues that, at a minimum, warn us that the current risk environment is quite high.

I'm taking the safe route.

ChartLists/Strategies

We held our LIVE Trading Room this morning and I added ZERO trades. I'm just not comfortable. We discussed potential trades for those willing to make some, but I'm making a personal decision to avoid all risk 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, August 14:

CSCO, UBS, CAH, PFGC, ESLT, STNE, EAT, LITE, RSKD

Thursday, August 15:

WMT, BABA, AMAT, DE, JD, AMCR, GRAB, COHR, NICE, TPR, GLOB, HRB

Economic Reports

July CPI: +0.2% (actual) vs. +0.2% (estimate)

July Core CPI: +0.2% (actual) vs. +0.2% (estimate

Happy trading!

Tom