Countdown

BUYERS’ EDGE
Growth stock breakouts are sticking.

For the week, major indexes were little changed after falling back from attempts at new highs.   

Buyers remain uninspired as fear of resurgent coronavirus cases and fruitless government stimulus negotiations dominate headlines. Heavy bets on the market may be off ahead of the Presidential election in two weeks.

INDEXWEEK CLOSECHANGEWEEK % YTD %
DJIA28,606190.10.2
Nasdaq11,672920.830.1
S&P 5003,48470.27.8
Russell 20001,634-4-0.2-2.1

A Shift to small-cap stocks was evident as the Russell 2K plays catchup with major indexes. Lots of talk regarding who’s leading the election polls and what it means for the market. No need to get political here. Just observe. 

Breadth and thrust stays bullish.

Weekly Adv/Decl Volume 
NYSE: 1.1, NASDAQ: 1.1 – Bullish.
Accum./Dist. Count – 20 Days S&P 500: 5/4, NASDAQ: 3/3
Weekly Adv/Dec Issues
NYSE: 0.6, NASDAQ: 0.9 – Slightly Bearish.
New Highs – NYSE: 389, NASDAQ: 308
New Lows – NYSE: 60, NASDAQ: 82

Coronavirus numbers are reportedly up with 22 states hitting record of a thousand new cases. Germany, Italy and France have tightened social restrictions to fight contagion. 

The big get bigger. Layoffs in the hundreds of thousands, as well as a record amount of small business closures, tell a different story than what Wall Street earnings portray. 

Earnings boosts driven by government stimulus and a recovering economy have been cause for optimism. 

Third quarter earnings for S&P 500 companies are expected to be down 20% from a year ago. But if so, would be better than predicted earlier in the year, as well as the 30% fall in the second quarter. 

Expect growth stocks with business models that cater to stay at home at work from home to do very well, especially with the wind of a V-shaped economic recovery at their back. But keep in mind those earnings are last quarter.

Some hedge funds are reportedly shorting companies benefiting from covid closures, arguing the stay at home business has hit its peak. Ground up analysis key in this environment, watch your local cash registers.

WEEKLY SECTOR ACTION

ETFNAME% CHG40WEMACHART
XLIIndustrial Sector Fund1.1New High. 
XLUUtilities Sector Fund0.82Right Base Forming. 
XLKTechnology Sector Fund0.785% Off High. 
XLCCommunication Services Sector Fund0.758% Off High. 
XLPConsumer Staples Sector Fund0.652% Off High. 
XLYConsumer Discretionary Sector Fund-0.35New High. 
XLBMaterials Sector Fund-0.36New High. 
XLVHealth Care Sector Fund-0.41New High. 
XLFFinancial Sector Fund-0.95Treading. 
XLEEnergy Sector Fund-1.9524% Off Low. 
XLREReal Estate Sector Fund-2.2231% Off Low. 

Financials (XLF, -0.95%) struggles to stay above its 40-week moving average as the sector threatens to pull the market lower.  

It was a big news week for banks as JPMorgan Chase (JPM, +0.31%) and Citigroup (C, -3.87%) handily beat earnings expectations, though were less confident with their outlooks. 

Bank of America (BAC, -4.42%) said consumer spending for its customers was up compared to a year ago, and that credit card delinquencies were down. But Don’t be surprised to see credit defaults spike after government stimulus wears off. 

Retail (XRT, +0.44%) hit another new high since breaking out last week. Retail spending appears healthy with a 1.9% increase for the month, beating a consensus 0.8% increase. 

Technology (XLK, +.78%) threatens to slow its climb as titans Apple (AAPL, +1.75%), whose stock didn’t have much reaction to the company’s revealing of its iPhone 12, and Microsoft (MSFT, +1.78%) posted a close in retreat from its weekly and all-time high. 

Communication (XLC, +0.75%) was little changed as components Facebook (FB, +0.56%) and Alphabet (GOOG, +3.81%) , as well as Apple, face pressure from the European Union for being too powerful, and may be subject to more rules to make them more transparent with data collection.

Netflix (NFLX, -1.60%) struggled to breakout to a new high as it faces competition from Walt Disney (DIS), who said it would focus on making its growing streaming services the main part of its business. Growth stock Roku (ROKU, -0.78%) is holding a solid uptrend since breaking out of its base a month ago.  

Semiconductors (SMH, -0.10%) hit a new high as it holds leadership status with a strong uptrend. PC sales rose 14.6% for the third quarter, their highest rate in a decade as work, and stay at home trends fueled demand. 

On the cloud computing front Fastly (FSLY, -33%) dampened moods as it lost a third of its market value after announcing third quarter revenue would fall 5% short of expectations as customers, including its largest TikTok, used less of its service than expected. 

Elsewhere in the cloud industry, Cloudfare Inc. (NET, +25.76%) scorched higher as the new cloud darling, and Twilio (TWLO) bought customer data startup Segment for $3.2B. Recent IPO Snowflake (SNOW, +1.90%) struggles to rise above its open price from a month ago.  

Healthcare (XLV, -0.41%) scratched a new high before retreating as Biotech (IBB, -1.98%) closed lower for the week despite several names holding breakout form and setting up in bases. See Setups.  

Autonomous vehicles are coming closer to streets near you. Google’s Waymo said it would put driverless cars with no human backups on the streets of the Phoenix are. General Motors (GM, +4%) will be joining in after receiving a permit for California to do the same. 

GSRTRADES BREAKOUTS & PULLBACKESThese breakout stocks met the strict GSRTrades fundamental criteria and have broken out of technical bases.

Strong representation from biotech, cloud computing, stay at home, work at home, software and online retail. 

TickerCompany NameIndustryGradeDemand
EXASExact Sciences CorporationBiotechnology2X+
FATEFate Therapeutics, Inc.Biotechnology3X++
FOLDAmicus Therapeutics, Inc.Biotechnology4X++
INSMInsmed IncorporatedBiotechnology2X++
TWSTTwist Bioscience Corp.Biotechnology4X++
BPMCBlueprint Medicines Corp.Biotechnology2X+
FVRRFiverr International Ltd.Data Processing Services3X++
TERTeradyne, Inc.Electronic Production Equipment4P+
ROKURoku, Inc. Class AElectronics/Appliances4X++
STRLSterling Construction Company, Inc.Engineering & Construction4P
COOPMr. Cooper Group, Inc.Finance/Rental/Leasing2P++
PFSIPennyMac Financial Services, Inc.Finance/Rental/Leasing1P++
EXPIeXp World Holdings, Inc.Financial Conglomerates4P++
BYNDBeyond Meat, Inc.Food: Major Diversified2X+
FRPTFreshpet IncFood: Specialty/Candy4P++
GRBKGreen Brick Partners, Inc.Homebuilding4P++
FIVNFive9, Inc.Information Technology Services4X++
GLOBGlobant SAInformation Technology Services4P++
NOWServiceNow, Inc.Information Technology Services4P++
QTWOQ2 Holdings, Inc.Information Technology Services4X+
UPLDUpland Software, Inc.Information Technology Services4X
NETCloudflare Inc Class AInformation Technology Services4X++
SQSquare, Inc. Class AInformation Technology Services4P++
MELIMercadoLibre, Inc.Internet Software/Services4X++
APPSDigital Turbine, Inc.Internet Software/Services3P++
FRHCFreedom Holding Corp.Investment Banks/Brokers3P++
PIPRPiper Sandler CompaniesInvestment Banks/Brokers4P
PJTPJT Partners, Inc. Class AInvestment Banks/Brokers4P+
PODDInsulet CorporationMedical Specialties4P++
NVCRNovoCure Ltd.Medical Specialties4P++
PRPLPurple Innovation, Inc.Miscellaneous4P++
ETSYEtsy, Inc.Miscellaneous Commercial Services3P++
KNSLKinsale Capital Group, Inc.Multi-Line Insurance4P++
PTONPeloton Interactive, Inc. Class AOther Consumer Services1X++
AVLRAvalara IncPackaged Software4X++
MDBMongoDB, Inc. Class APackaged Software4X++
OKTAOkta, Inc. Class APackaged Software4X++
TEAMAtlassian Corp. Plc Class APackaged Software4X++
TENBTenable Holdings, Inc.Packaged Software4X++
ZSZscaler, Inc.Packaged Software4X++
DDOGDatadog Inc Class APackaged Software2P++
TWLOTwilio, Inc. Class APackaged Software4X++
BMYBristol-Myers Squibb CompanyPharmaceuticals: Major4X+
GMREGlobal Medical REIT IncReal Estate Investment Trusts4P+
NVDANVIDIA CorporationSemiconductors4P++
TRUPTrupanion, Inc.Specialty Insurance4P++
LOVELovesac CompanySpecialty Stores4X++

These top names serve as leadership, and will help determine the success of other potential breakouts found on our Bases and Lower Bases lists.

Keep your head clear,

Dan