EB Daily Market Report - Wednesday, January 22, 2025

Executive Summary

• Our major indices were higher overnight and we gapped higher to keep the recent uptrend intact
• NASDAQ futures were outpacing other areas as Netflix (NFLX, +9.74%) surged after stronger-than-expected revenues and earnings, along with very strong subscriber numbers
• The 10-year treasury yield ($TNX) continues to hover near its 20-day EMA at 4.60%
• Commodities are mixed with gold ($GOLD, +0.32%) higher and crude oil ($WTIC, -0.47%) lower; crude is approaching its rising 20-day EMA after breaking out to its highest level in 4-5 months
• Technology (XLK, +2.39%) and communication services (XLC, +1.00%) are 2 of the 3 sectors in positive territory today
• Utilities (XLU, -1.59%) and real estate (XLRE, -1.55%) lead 8 falling sectors to the downside
• Earnings season is picking up and will remain in focus the next 3-4 weeks

Market Outlook

Let's take a quick look at a Dow Jones update:

Quite simply, support resides between 41600-42200 as you can see the breakout at the 41600 level in September and recent weakness finding lows between 41600-42200. Resistance is clearly the all-time high just above 45000. We're range-bound for now, but definitely with a bullish bias, given the uptrend in play.

Sectors/Industries

I discussed the key support level that home construction stocks ($DJUSHB) were testing little over a week ago at 2300. I also talked about the tame inflation data and how falling treasury yields could support a nice recovery in the DJUSHB. Well, as the TNX has declined, check out the leadership in home construction:

I believe the TNX will head lower, providing further upside to home construction stocks. DR Horton, Inc. (DHI,+1.82%) will be an interesting stock to watch. It's been a weak stock within the DJUSHB and moved higher with earnings to test its declining 50-day SMA. Yesterday, it dropped back to test its now-rising 20-day EMA. Which moving average holds? If a weak stock like DHI can make a break above its 50-day SMA, that could bode very well for other home construction stocks this earnings season. Time will tell, but it's something I'll be watching.

ChartLists and Trading Strategies

Recently, I've spoken about relative strength providing clues about upcoming earnings. Here are two recent examples and you can see the positive reactions of both after excellent quarterly results were announced.

Netflix (NFLX)

It's been a great day for NFLX in terms of its daily gain and breakout, but the black candle is short-term ominous. Watch the two key levels of support - price and gap - over the next few days to few weeks. Relative strength suggested a solid report was coming, however.

Interactive Brokers (IBKR)

The relative strength and AD line were even stronger here. Throw in that bullish cap with handle and IBKR looked poised for a strong quarterly earnings report and that's exactly what it got. I see IBKR ultimately hitting its initial measurement of the cup with handle pattern to 217.

Upcoming Earnings

The following are expected earnings reports after today's close and before tomorrow's open. Stocks highlighted in BOLD represent stocks included in one of our portfolios.

Wednesday, January 22 (after market close):

KMI, DFS, STLD, AA, CACI, KNX, RLI, CADE, HXL, PLXS, CNS, SLG, CATY

Thursday, January 23 (before market open):

GE, UNP, ELV, FCX, CHT, NTRS, MKC, AAL, MMYT, ORI, ALK, TAL, GATX, TCBI

Economic Reports

December leading indicators: -0.1% (actual) vs. -0.1% (estimate)

Happy trading!

Tom