EB Daily Market Report - Wednesday, October 15, 2024
Executive Market Summary
- Futures were mostly flat overnight, though the small cap Russell 2000 (IWM) did show more relative strength
- The IWM is up 1.6% on the session and has remained much stronger than its major index counterparts
- Cryptocurrencies are moving higher as bitcoin ($BTCUSD, +1.42%) spikes to a multi-month high
- Most commodities are higher, though crude oil ($WTIC, -0.10%) is flat just below $71 per barrel
- The 10-year treasury yield ($TNX) continues its short-term decline, falling 2 basis points to 4.01%
- Value-oriented stocks are leaders today again, with utilities (XLU, +2.02%) and financials (XLF, +1.26%) showing the most strength
- Meanwhile, communication services (XLC, -0.09%) is the only sector in negative territory, led lower by internet ($DJUSNS, -0.87%)
- Airlines ($DJUSAR, +7.11%) are flying higher (no pun intended), helping transports ($TRAN) trade at a 52-week high - transports breaking out are historically a great signal for future bullish S&P 500 behavior
- United Airlines (UAL, +13.97%) is easily the best-performing stock in the S&P 500; Delta Airlines (DAL, +7.01%) is 2nd
Market Outlook
We do have a bearish development in that the S&P 500 has been in an uptrend and we're now seeing the Volatility Index ($VIX) and the S&P 500 both begin to move in lockstep with one another. That's usually a reversing signal on the S&P 500. Check this out:
These are just the readings over the past year and a reversal is most definitely NOT a guarantee at this point. But it's a RISK that we should be aware of.
Sector/Industry Focus
It's options expiration week and we should understand that any aggressive areas that have been moving higher the past few to several weeks may be subject to a brief selloff over the next few days to a week. One such industry group could be recreational services ($DJUSRQ), a part of consumer discretionary (XLY):
This group has been extremely strong and bullish and I expect to see higher prices down the road. However, it's clearly overbought with an RSI of nearly 77. Its PPO is as stretched as it's been at any point in 2024. Would a one-week pullback to or close to its rising 20-day EMA be a bad thing? I don't think so, and it would likely benefit market makers.
ChartLists/Strategies
Earnings season is cranking up and it's important to watch relative strength in terms of what we should expect from each company's quarterly report. For instance, I'm not looking for much out of PPG Industries, Inc. (PPG):
The AD line is awful and certainly not representing a lot of accumulation by the big Wall Street firms. Then there's the relative strength vs. its peers, which is downright ugly. I don't know what's coming in this earnings report, which is this afternoon, by the way, but I'm not expecting a particularly strong report.
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.
Wednesday, October 16:
ASML, ABT, PLD, USB, CSX, KMI, CCI, LVS, DFS, EFX, PPG, SYF, STLD, CFG, AA, REXR, FHN, FR, SNV, SLG, LBRT
Thursday, October 17:
TSM, NFLX, ISRG, ELV, BX, MMC, INFY, TFC, TRV, WIT, MTB, NOK, HBAN, KEY, SNA, CCK, WAL, WBS, BSH, BMI, CMC, OZK, IRDM, MAN
Economic Reports
None
Happy trading!
Tom