EB Daily Market Report - Thursday, January 30, 2025
Executive Summary
- Futures were higher overnight and our major indices gapped higher this morning
- Strength is more skewed towards the small caps (IWM, +1.48%)
- Gold ($GOLD, +1.81%) is having an outstanding day as it trades at an all-time high
- Crude oil ($WTIC, +0.04%) is flat and just below $73 per barrel
- The 10-year treasury yield ($TNX) is lower by 4 basis points to 4.51%, its lowest level in a month
- The defensive utilities (XLU, +2.15%) and real estate (XLRE, +1.76%) are leading stocks higher
- 9 of 11 sectors are up, but the two slightly lower are technology (XLK) and communication services (XLC), both down 0.03%
- Q4 GDP was announced this morning and it was below expectations; the Q4 PCE was much higher than expected
- Pending home sales tumbled more than 5%, reflecting a weak housing market
- Earnings remain in focus as IBM exploded higher by 12% after reporting excellent quarterly results; the Mag 7 has seen mixed results with MSFT down 6%, but META and TSLA up 1.33% and 3.58%, respectively
Market Outlook
Well, we survived another Fed meeting and 3 Mag 7 quarterly earnings reports. The big earnings reports could be summarized as the good, the bad, and the ugly:
Good - META:
META has completely changed the look of its chart over the past month or two. A strong rally into earnings in January isn't necessarily unusual as internet stocks ($DJUSNS, +1.80%) love the month of January. We discussed this at the beginning of the month when we included both META and NFLX in our Top 20 Seasonal stocks for January at the beginning of the month. META is up 17.54% in January so far, while NFLX has risen 9.36%.
Bad - TSLA:
The chart and the market reaction to TSLA's earnings report isn't the "bad" part here. Instead, the bad refers to TSLA's revenues and EPS, both of which were reported below expectations. The revenues were awful, coming in 7% below expectations. Yet somehow, TSLA has convinced investors that it's not all bad as the stock is up 4%.
Ugly - MSFT:
Unlike TSLA, MSFT actually beat its revenue and EPS consensus estimates. But it just didn't matter. MSFT has been in a lengthy downtrend relative to its software peers ($DJUSSW, -3.50%) and it extended its underperformance with today's 6% drop.
After the bell today, we'll get the latest from AAPL:
AAPL literally could head in either direction after its report this afternoon. Key price resistance is at 260 and key price support is at 220. Current price is 239, equidistant to both price support and resistance. With the exception of the first half of January, AAPL has provided excellent leadership in the computer hardware space ($DJUSCR, +0.01%) over the past 11 months.
Sectors/Industries
I like to review the sector and industry strength after a big event like a FOMC announcement. So here is a first glance at how our various sectors have performed since the 2pm ET announcement on Wednesday:
Now, keep in mind it's only been one day, but I think it's rather clear that defensive- and value-oriented stocks have been in favor since the Fed announced yesterday that they're "pausing" interest rate cuts. I'd view this activity to be neutral to bearish for right now, but if it continues over the next week or so and our major indices move to new highs, this could become part of the bearish "developing story" that I discussed on Saturday in the Weekly Market Report. It's still way too early to make any major changes in investment/trading strategies, but simply be aware of what's currently taking place in the market.
ChartLists and Trading Strategies
Given the current favoritism towards defensive/value stocks, I decided to trade a defensive stock on our Strong AD ChartList (SADCL) that started this morning a bit weak. Remember, SADCL stocks tend to perform better in the afternoons, which leads to their rising AD line indicator. First, check out the daily chart on ISRG and its excellent AD line (also note it's in our Model Portfolio this quarter, which gives me more confidence to trade it):
ISRG's AD line has continued to soar, even though we've seen weakness on the daily chart. That tells me that the recent selling is likely nothing more than market maker manipulation, triggering fear early in trading sessions, so that they can buy for their own accounts and institutional investors. ISRG gapped up today, but then sold off until roughly 11am ET. From there, check out the rally:
This may not look like much as ISRG has only rebounded 1% from its 11am ET low, but this is a stock that consistently tells us to buy weakness in the morning. Check out all those green arrows over the past 5 days. Nearly every meaningful low occurs at the very beginning of the day or 11am ET, or both. As a short-term trader, scalping 1% here or 2% there adds up over time on these Strong AD stocks, especially knowing that more defensive stocks are in favor right now.
Upcoming Earnings
During the majority of earnings season, we produce Upcoming Earnings ChartLists that feature stocks trading after the market close (AMC) that day or before the market opens (BMO) the next day on one ChartList. Here is the link to today's AMC and tomorrow's BMO ChartList, so that you can peruse important stocks that will be reporting quarterly results between today at 4pm ET and tomorrow at 9:30am ET:
CLICK HERE for link
Then type in this password when prompted: EARN2682
Note: If you are a StockCharts.com member, either Extra or Pro, you can click the link above and use the password provided to download this ChartList into your account. If you are a Basic member at StockCharts.com or a non-member, you can still click the link and use the password to VIEW ONLY the ChartList. I always like to know the key earnings reports that could impact the stock market the next day and this ChartList helps to do just that.
Economic Reports
Q4 GDP (initial reading): 2.3% (actual) vs. 2.6% (estimate)
Q4 PCE - annual rate: 4.2% (actual) vs. 3.1% (estimate)
Initial jobless claims: 207,000 (actual) vs. 224,000 (estimate)
December pending home sales: -5.5% (actual) vs. +0.4% (estimate)
Happy trading!
Tom