EB Daily Market Report - Wednesday, December 11, 2024

Executive Market Summary

• Futures were higher overnight and our major indices gapped higher at the opening bell
• The NASDAQ 100 and S&P 500 have been gaining throughout the day, led by large cap growth (IWF, +1.60%)
• The three leading industry groups today are automobiles ($DJUSAU, +4.12%), semiconductors ($DJUSSC, +3.53%), and internet ($DJUSNS, +3.12%)
• Autos continue their torrid pace higher as Tesla (TSLA, +4.72%) topped its all-time record intraday high of 414.50 from November 4, 2021
• Technology (XLK, +1.61%) leads all sectors today, followed by consumer discretionary (XLY, +1.59%), and communication services (XLC, +1.38%) - all 3 of our aggressive sectors
• Health care (XLV, -1.12%) is our primary laggard today, as health care providers ($DJUSHP, -3.38%) take another big hit
• Cryptocurrencies are rebounding as XRP ($XRPUSD, +8.51%) and Solana ($SOLUSD, +7.84%) surge
• Most commodities are higher today, with crude oil ($WTIC, +2.54%) jumping above $70 per barrel
• The 10-year treasury yield ($TNX) is up 5 basis points to 4.27%
• Adobe Systems (ADBE, +0.29%), a prominent software stock, reports earnings today after the closing bell

Market Outlook

Large cap growth (IWF) is powering past large cap value (IWD) recently and it's continuing today. There's also a strong positive correlation between the direction of the IWF:IWD and the direction of the S&P 500:

Given the tremendous strength in the IWF:IWD ratio right now and the recent relative strength of consumer discretionary vs. consumer staples (XLY:XLP), it certainly seems to me that the market is sending us a rather strong signal that the S&P 500 is heading higher, not lower.

Sector/Industry Focus

Consumer discretionary has been strong and footwear ($DJUSFT) is beginning to show life again. It recently broke back above its 20-day EMA and 50-day SMA and we've seen a "golden cross" where the 20-day EMA crosses above the 50-day SMA. These are bullish developments, though I wouldn't say we have a major confirmation just yet:

A trend line breakout would be the next thing to look for. Also, the AD line needs to turn higher. But at least price action is showing a bit of bullishness. If the bullishness were to continue, then stocks like NKE and CROX would be interesting turnaround candidates.

ChartLists/Strategies

As I've mentioned in the past, when I buy, I want to buy at key price and/or moving average support. I ran our Downtrend Reversal scan against our Strong Earnings and Raised Guidance ChartLists to look for strong fundamental companies that might be reversing. 6 stocks were returned - ATMU, ATRC, GFF, GIL, PAY, and VIRT. Here are 4 that look interesting:

ATMU

PPO nearing centerline test. Strength of AD line has reversed, one unfortunate change. 39.50-40.25 range needs to hold as support.

GFF

A lot of volatility on this one. 78.40-80.00 is where I'd like to see support hold on GFF.

GIL

The price chart looks deceivingly solid. Check out relative strength, it's not good. Loss of price support and you want to be VERY careful here.

PAY

As far as AD line, relative strength, and key support, PAY looks like the best of these 4 to me. My stop would be a close below 32 and my target would be the recent price high above 38. The reward to risk is set up best here and the secondary indicators look strongest here as well. I don't own PAY right now, but it's definitely a trade I'm considering.

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, December 11 - after market close (AMC):

ADBE, NDSN

Thursday, December 12 - before market open (BMO):

CIEN

Economic Reports

November CPI: +0.3% (actual) vs. +0.3% (estimate)

November Core CPI: +0.3% (actual) vs. +0.3% (estimate)

Happy trading!

Tom