Jamie Dimon’s Outlook is More Powerful than Jerome Powell’s

It’s here… Earnings season starts today, and things aren’t off to a good start.

The S&P 500 and other indices were trading lower ahead of the open as investors decipher earnings reports from the first round of banks to report for the season.

JPMorgan (JPM), Wells Fargo (WFC), Citibank (C), and Blackrock (BLK) were among the first to report.  All four of the banks beat their earnings and revenue marks, so things should be moving higher, right?second quarter earnings


The market appears to be putting a little more emphasis on comments from JPMorgan’s CEO Jamie Dimon. The outspoken CEO has been making a lot of comments about the Federal Reserve and interest rates lately, those comments found their way into the bank’s earnings comments.

Allow me to quote….

"Many economic indicators continue to be favorable. However, looking ahead, we remain alert to a number of significant uncertain forces.

First, the global landscape is unsettling - terrible wars and violence continue to cause suffering, and geopolitical tensions are growing.

Second, there seems to be a large number of persistent inflationary pressures, which may likely continue.

And finally, we have never truly experienced the full effect of quantitative tightening on this scale. We do not know how these factors will play out, but we must prepare the Firm for a wide range of potential environments to ensure that we can consistently be there for clients."

Jamie Dimon, CEO, JPMorgan

Let’s face it: Jamie Dimon is saying what everyone else in the room is thinking.

This market feels like a wobbly stool in a dive bar. The more pressure you put on it, the less comfortable you feel.

And there is building pressure on the market.

For example, the CBOE Volatility Index ($VIX) is breaking above its February highs. I’ll tell you about how important that is in just a minute.

The Nasdaq 100 is preparing to break below its 50-day moving average for the first time since October.

Yesterday’s rally, 2%? You know what it felt like? That old rally from 2021 when the only things that traded higher were referred to as “FANG.” I call it putting lipstick on a pig and the market crashed shortly after that fugazi rally.

Finally, a little deeper on the financials. The SPDR Financial ETF (XLF) is notorious for seeing a “buy the rumor” rally ahead of the first day of the earnings season.

Historically, the bank heavy ETF rallies from 4-8% in the week ahead of the first earnings day, as investors get excited about the earnings season. This quarter, the telltale ETF lost 5% of its value heading into the earnings season.

xlf stock chart

What does that mean? It means that investors aren’t excited about earnings. It means that investors are looking for the exit door ahead of the show.

The one thing we need over the next month is a good earnings season to lure more buyers into the market as it trades at its all-time highs.

Look, today’s earnings, and the market’s response are a single data point that’s part of a series of events that will last the next month or two, so don’t sell everything just yet.

But remember, two points are a line, and three points are the beginning of a trend as we head into next week’s heavy dose of earnings.

Market tops are almost always marked by an event, they don’t just materialize out of nowhere. This earning season is setting itself up to be the most important event in the last year.

Bottom Line

There’s a clear warning sign here. The market’s “tome” for the next month will be set in very short order as investors get their first glimpse of earnings results. We’ve got a few weeks before the large-cap technology sector will report, which is what investors are eyeing as “the prize.”

The market’s positive momentum has been violated which means that now is the time to be cautious.  Here’s what I’m doing…

  • Setting trailing stops on positions that are more than 50% profitable.
  • Adding protective puts to my portfolio.
  • Adding speculative puts on companies like Rivian (RIVN), Tesla (TSLA), Boeing (BA), and yes… JPMorgan.

I’m also watching the market’s “Fear Index” very closely as it threatens to break a key level.  Let’s talk about that next.

About the Author

Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.

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