EB Daily Market Report - Tuesday, October 22, 2024

Tom Bowley - October 22, 2024

Executive Market Summary

Futures were lower overnight and we extended the weakness from Monday - at least on the Dow Jones and Russell 2000
There's been buying since early morning lows were established, however, and we have a bifurcated market today with both the S&P 500 and NASDAQ 100 trading higher at last check
The 10-year treasury yield ($TNX) is up another 2 basis points to 4.20%, spooking those stock market traders that are expecting further cuts in the fed funds rate
Volatility ($VIX, -0.71%) spiked earlier in the session, but has turned negative this afternoon
Much of today's strength is in defensive areas, reversing what we saw yesterday; consumer staples (XLP, +0.58%) and real estate (XLRE, +0.48%) lead bifurcated sector action
Industrials (XLI, -1.02%) is the weakest sector as selling in aerospace ($DJUSAS, -3.40%) and defense ($DJUSDN, -2.65%) weighs
Another rough day in home construction ($DJUSHB, -3.85%) can be attributed to the stubbornly high TNX
NVIDIA Corp (NVDA, -0.07%) is struggling to tack on gains after finally breaking above 140 and and 4-month resistance on Monday
Philip Morris (PM, +10.37%) and General Motors (GM, +10.27%) are leading the S&P 500 higher after reporting solid quarterly results

Market Outlook

We've entered the worst week of the year historically. Here are the annualized returns of 3 major indices for the period October 21st (close) to October 27th (close):

S&P 500 since 1950: -42.45%
NASDAQ since 1971: -64.90%
Russell 2000 since 1987: -47.22%

This doesn't mean that we should expect lower prices every day this week, nor does it mean we should expect a large decline. It simply tells us what the stock market's tendencies are this time of year. The stock market is also very overbought and complacency remains a short-term issue. The 5-day moving average of the equity only put call ratio has persistently posted readings around the .55 level, a level that in the past has resulted in short-term market selling.

But if there's one thing I've learned over 40+ years of trading, it's that secular bull market advances can be extremely resilient and move higher against all short-term odds.

Sector/Industry Focus

Broadline retailers ($DJUSRB) have printed a double top or a cup, depending on whether you take a bearish or bullish stance on U.S. stocks. Check out the current chart:

If you're bearish and believe a double top is in place, then a move below 3500 is what you want to see, which executes the bearish pattern. However, if you're bullish, then you see a cup with a possible handle that formed down to, and just beneath, the rising 20-day EMA. A breakout above 4160 would be confirmation of the pattern and a likely move to 4900.

ChartLists/Strategies

It's taken 5 months of consolidation and weakness, but many semiconductors ($DJUSSC) have recovered and their leader, NVIDIA Corp (NVDA), has broken out again:

The PPO is accelerating above the centerline, indicative of strengthening bullish momentum. Also, relative strength vs. NVDA's semiconductor peers shows another breakout. NVDA is a leader in one of the most bullish-friendly industry groups. It's hard not to like NVDA heading into its November 21st earnings 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.

Tuesday, October 22:

GE, DHR, PM, VZ, TXN, RTX, LMT, FI, SHW, MCO, SCCO, MMM, CNI, FCX, PCAR, NSC, GM, KMB, BKR, CSGP, PHM, NVR, STX, GPC, PKG, MANH, IHG, DGX, PNR, EWBC, ENPH, IPG, AOS, IVZ, MLI, RHI, PFSI, PII, LRN, BKU, PMT

Wednesday, October 23:

TSLA, KO, TMUS, TMO, IBM, NOW, NEE, T, BSX, BA, LRCX, GD, CME, APH, GEV, CP, ORLY, NEM, ROP, HLT, URI, AMP, LYG, WCN, ODFL, VRT, LVS, DB, WAB, RJF, VLTO, TYL, ICLR, ROL, LII, TDY, TRU, TER, WSO, NTRS, AVY, MOH, ALGN, MORN, GGG, CACI, EDU, MMYT, EVR, NLY, SF, CHDN, GL, SEIC, KNX, LAD, TMHC, CLS, WH, MAT, PEGA, COOP, PI, WHR, MC, ASGN, WU, PLXS, GSHD, QS, PRG, WGO, HLX, LC, MCRI, MXL

Economic Reports

None

Happy trading!

Tom