EB Daily Market Report - Thursday, August 23, 2024

Tom Bowley - August 22, 2024

Portfolio DRAFT Update

We will be holding our quarterly Portfolio DRAFT on Monday, August 26, 2024 at 5:30pm ET. It will be recorded for those unable to attend live, but I hope to see you there!

Room instructions will be sent out on Monday.

StockCharts Thursday Show

Earlier today, I recorded my weekly show at StockCharts.com titled, "Will Fed's Next Move Cause A Big Market SELLOFF?" Click on the link to listen in to my latest thoughts.

Executive Market Summary

Futures were higher across the board and our major indices gapped higher this morning
60-minute negative divergences have played out today, with many indices/sectors testing their 50-day SMAs
The 10-year treasury yield ($TNX) is up 8 basis points to 3.86% after testing key yield support from 3.70%-3.80%
Growth stocks (IWF, -1.49%) are significantly underperforming their value counterparts (IWD, -0.27%)
More defensive and value-oriented sectors are leading, as you might expect on a day like today; financials (XLF, +0.38%) are performing well
Technology (XLK, -2.34%) and consumer discretionary (XLY, -1.79%) are struggling big time
Semiconductors ($DJUSSC, -3.65%) have completely reversed, breaking their recent uptrend; I'll be watching to see if the DJUSSC can hold its rising 20-day EMA tomorrow on any further weakness
Crude oil ($WTIC, +1.35%) is higher to nearly $73 per barrel, but most other commodities are weaker
Fed Chief Powell will speak Friday morning at 10:00am ET from Jackson Hole, WY, perhaps providing more clarity on what the Fed will likely do at its September meeting
Zoom Video Communications (ZM, +12.80%) is having a monstrous day with very heavy volume after posting a very solid quarterly earnings report

Market Outlook

Today, those negative divergences are playing out down to 50-hour SMA tests. That doesn't mean the selling is over or that we'll see a big rally. It simply means that the slowing momentum, as evidenced by negative divergences, has "reset". Here are charts to illustrate on both the S&P 500 and NASDAQ 100:

S&P 500:

We're not totally to the 50-hour SMA, but we're close enough, in my opinion. If 50-hour SMA doesn't hold as support, I'd look to next support at 5500 (gap support).

NASDAQ 100:

The NDX has reached its 50-hour SMA, so the "reset" is complete. Notice it's taken roughly 3 days to "resolve" this negative divergence. That's why I typically say these hourly divergences usually play out over 1-3 days.

Like the S&P 500, watch for gap support near 19250 to be tested next, if the 50-hour SMA doesn't hold.

Sector/Industry Focus

First, this is an UGLY reversing candle on the NASDAQ 100:

I don't like this reversal today, although things could either change or escalate with Fed Chief Powell speaking tomorrow at 10:00am ET from the Jackson Hole, WY Economic Symposium. The bottom panel shows traders exiting growth stocks faster than value stocks. We'll see if that continues tomorrow after the big speech.

For now, financials (XLF) look much safer as they threaten a breakout:

ChartLists/Strategies

Here are a couple interesting financial stocks to consider from our Strong Earnings ChartList (SECL):

PRG - watch for a breakout above the 46.00-46.25 level.

LC - broke above 9.50 in July and proceeded to establish key resistance at 12.50. After weakening for a few days, LC is rising again, poised to challenge that 12.50 level. A breakout above would be very bullish.

Earnings Reports

Here are the key earnings reports for the next two days. I include all companies with market caps of $10 billion or more and 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, August 22:

INTU, TD, WDAY, NTES, ROST, BIDU, WSM, VIK, AEG, BJ, CAVA, BILI, BILL, AAP, IQ, PTON

Friday, August 23:

None

Economic Reports

Initial jobless claims: 232,000 (actual) vs. 234,000 (estimate)

August PMI composite flash: 54.1 (actual) vs. 53.3 (estimate)

July existing home sales: 3,950,000 (actual) vs. 3,900,000 (estimate)

Happy trading!

Tom