It’s hard to remember or even imagine this year seeing the sharpest fall into a bear market territory in history, and now the S&P 500 and the Dow Jones are at all-time high points again. 

• NASDAQ: +32.9%
• S&P 500: +12.3%
• Dow Jones: +5.0%
• Russell 2000: +7.0%

Every Dog Has Its Day

This leg higher is about the laggards or those stocks and sectors that not long ago could only be described as “dogs with fleas.” Now they are thoroughbreds racing to catch up with their rival sectors.  

S&P 500 Index	+1.16%
Communication Services XLC	+0.64%
Consumer Discretionary XLY	+1.31%
Consumer Staples XLP	+0.92%
Energy XLE	+6.58%
Financials XLF	+2.22%
Health Care XLV		-0.17%
Industrials XLI	+2.44%
Materials XLB	+1.97%
Real Estate XLRE	+0.64%
Technology XLK	+0.97%
Utilities XLU	+1.01%

Overbought?

What’s fascinating about this market is how to measure overbought and oversold conditions. For instance,  Materials (XLB) is up 82.8% since the March 23rd low point, but only up 14.5% for the year.  Industrials (XLI) are a bigger conundrum, up 79.9% since the market low, but only up 7.8% for the year.

Three sectors are still negative for 2020, including Energy, down 40.6% for the year.

Oil Gusher

Oil field services and refiners continue to lead the Energy sector higher. It’s the size of these moves that has been truly amazing. They all have a lot more room to the upside, but it’s not helping the market beyond positive vaccine news. Draw down surprises would add octane to the rally.

Company	Weight	Nov 16 Move
TechnipFMC plc	0.56%	+12.18%
Schlumberger Ltd	4.46%	+11.33%
National Oilwell Varco Inc	0.75%	+9.65%
Valero Energy Corp	3.64%	+9.33%
HollyFrontier Corporation	0.58%	+9.17%
Marathon Petroleum Corp.	4.25%	+8.44%
Phillips 66	4.38%	+8.23%

Here They Come

So, the NASDAQ is having a hard time getting back to its all-time high, while the S&P 500 has found its groove. Each day, the party in the index best reflects the country unless you go with the Wilshire 5000 Index and add all companies - but I have a problem with that.

S&P 500

Winners

• 290 average gain: +25.51%

S&P 500 Losers

• 215 average loss: -19.73%

NASDAQ

Winners

• 598 average gain: +67.34%

Losers

• 415 average loss: -21.83%

The NASDAQ exhibited a fair amount of spunk yesterday. I suspect the index will form some kind of wedge, then break out on the wings of semiconductors and software stocks, not only teetering to lockdowns.

Consumers & Heavy Lifting

Today, we get the read-on retail spending, as the week will also see earnings from the nation’s largest retailers. It’s a great chance to see if consumers continue to step up to the plate. 

The composition of the U.S. economy has changed dramatically since the year I was born. Government and trade were larger percentages of the Gross Domestic Product (GDP).

The economy is all about personal consumption these days.

Gross Domestic Product	1962		2019
	Components	% of Total	Components	% of Total
Consumption	$382.6	60.0%	$14,563.9	68.0%
Investment	$97.0	16.1%	$3,742.8	17.5%
Government	$140.3	23.2%	$3,754,3	17.5%
Trade	$4.0	0.7%	-$632.0	-2.9%
Total	$603.9	100.0%	$21,429.0	99.9%
In billion USD

Consumers Have Dry Powder

Consumers are well-fixed and exhibit few signs of strains. Of course, there is still a large swath in desperate shape, and that’s where additional stimulus would be a boon. However, we are not talking about a $2.2 trillion package. One more injection would also spark households sitting on increased savings to spend.

That’s the centerpiece of our investment theme of 2021.

October Card Metrics	Net Charge-offs		Delinquency Rate
	Oct	Sept	Oct	Sept
(C) Citigroup	2.03%	2.55%	1.37%	1.40%
(AXP) American Express	2.20%	2.00%	1.10%	1.10%
(BAC) Bank of America	1.97%	1.90%	1.36%	1.20%
(JPM) JPMorgan Chase & Co.	1.89%	1.92%	1.00%	0.98%
(COF) Capital One	3.11%	3.35%	2.19%	2.21%
(DFS) Discover Financial Services	2.90%	3.31%	1.99%	1.91%

                                         Source: Seeking Alpha

Hotline Model Portfolio Approach

Yesterday we took profits in some Technology stocks and added a new position in Healthcare in our Hotline Model Portfolio.

Today’s Session

Equity futures have been under pressure all morning, but the selling picked up as earnings and data rolled out.  Retail earnings were mostly strong, although a lack of guidance mitigated positive impacts on share prices.

Walmart (WMT)

• Revenue +5.2% y/y $134.7 billion, consensus $132.4 billion
• EPS $1.34 VS $1.18 consensus
• Walmart-only US comps 6.4%; 3.5% consensus
• Sam's Club U.S. comparable sales ex-gas 11.1%; consensus 7.10%
• U.S. comparable sales ex-gas +7.1% versus consensus +4.3%
• Transactions -14.2%
• Average purchase +24%
• Ecommerce +79%
• No Guidance

Note: Customers continued to consolidate store shopping trips with significantly larger average baskets and shifted more purchases to eCommerce; transaction volume improved as store hours were extended.

Home Depot (HD)

• Revenues +23.2% $33.54 billion versus consensus $28.6 billion
• EPS $3.18 against consensus $3.02
• Comparable sales +24.1%
• US comparable sales +24.6%*
• Transaction +13% to 453.2 million
• Average ticket price +10% to $72.9 million
• Announced $1B investment in employee salaries
• No Guidance

*US comps 25% for two consecutive quarters

Kohl’s (KSS)

• Revenue -14.0% to $3.98 billion versus consensus $3.85 billion
• EPS $0.01 VS consensus -$0.44 consensus
• Comparable store sales -13.3% versus consensus of -11.7%
• Gross margin 35.8% vs 36.3% year ago
• No guidance

Retail Sales & Consumers

Perhaps it is a sign consumers are becoming more reluctant to spend or are tapped out, as the Retail Sales came in below consensus.

The +0.3% increase was less than +0.5% or +0.6% consensus (too many consensus numbers).

Highlights

• Electronics
• Internet
• Building materials

Concerns

• Department Stores
• Furniture

October 2020	M/M	Y/Y
Headline	+0.3%	+5.7%
Ex-Motor	+0.2%	+4.4%
Motor	+0.4%	+10.7%
Furniture	-0.4%	+5.2%
Electronics	+1.2%	-3.9%
Building Materials	+0.9%	+19.5%
Grocery	-0.4%	+9.2%
Health and Personal Care	-0.1%	+3.8%
Gasoline	+0.4%	-14.0%
Clothing	-4.2%	-12.6%
Sporting Goods	-4.2%	+12.4%
Department Stores	-4.6%	-11.9%
Internet	+3.1%	+29.1%
Restaurants	-0.1%	-14.2%

The markets are taking a breather this morning and would love to see the market blow off some steam.

Comments

Charles. Here’s the picture. Stop worrying about overbought or oversold. Do what you’re good at which is evaluating companies based on their quality. Kiswardy James on 11/17/2020 9:52:17 AM

OVERBOUGHT OR OVERSOLD? ......... OVERTHOUGHT......song of the day to the hideous bubble blob covid governors/mayors/whatever ... https://www.youtube.com/watch?v=J0ag8DkipmQ ..............( if you didn't know better you would think this is Savoy Brown ) prettydirect on 11/17/2020 10:07:24 AM

I lost my connection yesterday, but I'm back on today! Great! Received a nice phone call from Jason with Wall Street Strategies wanting to help me out. I am now good Jason. Will continue to learn and profit from Charles wisdom. Thanks for the concern. Lorin Kenfield on 11/17/2020 11:37:09 AM

Very impressive trades. New member Mov. 2020. Already paid for the cost of the hotline. Paul Weigel on 11/22/2020 7:25:07 PM

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