Trading Places with Tom Bowley

Determining If A Group Could Be A 2020 Market Leader; 2020 Market Vision Is Just One Week Away!

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Whether a group looks strong or weak can easily be debated and it's what makes the stock market go round and round. Nondurable household products is one example. Is it breaking out or breaking down? This could be an interesting debate and it really gets to the heart of relative strength.

First, I want you to look at a daily chart of the Dow Jones U.S. Nondurable Household Products Index ($DJUSHN):

There's a fairly well-defined up channel in place here and it would be difficult to find technical fault looking exclusively at its absolute chart. But check out what happens when we compare the DJUSHN to the benchmark S&P 500:

There's a lot going on here, but first focus on the red circles. The relative PPO has been in negative territory for two months. The relative uptrend has broken and the DJUSHN:SPX has been downtrending throughout the S&P 500's magical run since early October. The relative RSI has dropped in each of the past two months well into the 30s, which rarely occurred when the DJUSHN was outperforming the benchmark index.

So again the question is.....is this group breaking out or is it breaking down?

I'm not sure of the answer, but I am sure of one thing. If I traded a stock within this industry group, I'd want to make sure it's a leader with strong fundamentals to go along with solid technicals. So I'd go to my Strong Earnings ChartList and look for a stock within this industry group. I have one currently and it has a SCTR score of 90, another sign of technical strength. It's Energizer Holdings (ENR) and here's the current technical view:

ENR enjoyed a nice gap higher following its most recent earnings report. And for good reason. Quarterly revenues were $719.0 million, topping Wall Street's consensus estimate of $713.1 million. Its EPS came in at $.93, which blew the doors off the consensus estimate of $.81. Better-than-expected results and relative strength is a powerful combination.

Always look to leaders when investing. It'll help you achieve much stronger results.

Speaking of great results, the S&P 500 has followed the exact course I expected back on September 23rd. Check out this market call in the EarningsBeats.com Daily Market Report three months ago:

I wish every call worked out this well. ;-)

As you probably know, I've been extremely bullish throughout 2019 and I'm maintaining that bullish forecast throughout 2020. Despite the Jerome Powell-led Federal Reserve's multiple blunders during 2019, the S&P 500 has gained approximately 30% in 2019 and is poised to tack on another 20-25% in 2020, in my opinion. The combination of moderate growth, little inflation, and historically low interest rates (though likely rising) will result in much higher stock valuations. Not only will future earnings rise, but also those future earnings are worth more in a low interest rate environment.

I've been featuring my Daily Market Report right here in my Trading Places blog throughout the holidays to give you a glimpse of what I provide to our members every day. Any time you stick your neck out on the line and make predictions or suggest investment ideas, there's the risk that you'll be proven wrong, but hey that comes with the territory. You can CLICK HERE to check out some of my better calls and ideas the past couple months and also to receive a special EarningsBeats.com offer.

Market Vision 2020

If you'd like to hear thoughts about 2020 from many of the world's leading technicians, I'd strongly urge you to REGISTER HERE for Market Vision 2020, EarningsBeats.com's online financial conference. John Murphy, Chief Technical Analyst at StockCharts.com and renowned author of several technical analysis books, will kick off the conference as its Keynote Speaker. John sees changes on the horizon and you're going to want to hear him firsthand as he describes the areas that he likes heading into 2020. Several other technical analysts including Arthur Hill, Greg Schnell, and yours truly, among many others, will be providing their "market vision" as well in this all day online conference slated for next Saturday, January 4th, 2020 - we're just one week away!!! Make sure you register and save your seat! The entire conference will be recorded for those unable to attend live or for those who can only attend a few sessions live.

I hope to see you there!

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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