Earnings Summary – Where Are We Now?
I know what you’re saying… Sure CJ, Microsoft (MSFT), Amazon (AMZN), and Alphabet (GOOGL) announce their results along with Tesla (TSLA). 
But while investors appear to be focusing solely on earnings results, there’s another flood of data hitting the market this week.
On the economic side, everything from new home sales to the gross domestic product (GDP) advance release to the Fed’s “favorite” inflation gauge to personal consumption expenditures (PCE) on Friday.
Put a mark next to that last figure, PCE prices, because we’ll come back to it in a second.
So far, we’ve seen 14% of the S&P 500 companies report their earnings results for this season.
Of those, 74% have beaten analyst expectations for earnings per share (EPS) and 58% have beaten their revenue targets. That’s not bad for early in the season.
Despite the positive results, the market just closed another week of losing price action. Why?
For the most part, it comes down to a fear trade.
- Fear that the earnings season won’t impress, especially the big AI and technology names.
- Geopolitical fear as well as fear surrounding our domestic political backdrop.
- Fear that inflation is preparing to make another run higher.
All three of these have investors looking to take profits from nearly every sector of the market.
The Nasdaq Composite, Dow Jones Industrial Average, and S&P 500 all notched lower closes for the week, continuing a trend started in March.
Where Are We Going?
As of now, the path of least resistance is lower.
Investors have set the market into a negative momentum machine that will take a large shift in sentiment to turn around.
We’ve not seen that “panic” moment when everyone is selling, which is often the best time to buy.
Be patient with me, it’s coming, and I’ll let you know when it’s close.
How Do We Get to That “Panic Moment”
There are a few things that I am watching closely, but none closer than the Russell 2000 Index ETF (IWM).
The small-cap index is the best to watch for an indication of when investors are going to start buying the dip.
Last week’s break below $200 puts the small-cap ETF on a crash course with critical support just 1.5% below Friday’s close.
This stresses the importance of the upcoming week’s earnings results being good enough to calm investors’ fears and get them engaged in the speculative markets, represented best by the IWM shares.
I’ll do a deeper dive into this subject tomorrow morning, but this is definitely the sector to watch.
This Week’s “Earnings Sleeper”: GE Aerospace
Last week didn’t play out as well as expected, but remember, it’s the long-term investment on Netflix (NFLX) shares that I really like here. Here’s the video I did on Netflix ahead of their earnings call.
GE (GE) will announce their quarterly results before the market open on Tuesday. GE Aerospace has been the best performing of the spinoff companies from the original GE shares. That split started last year, and since then, GE shares have returned 88% over the one-year period.
Shares of GE pulled back to their 20-day moving average last week, a perfect rest for the stock ahead of its earnings report on Tuesday.
The average analyst has GE targeted for an EPS of $0.65 which feels a bit high for the company which may be the reason for last week’s quick drop to the stock’s 20-day moving average.
I look at a touch of the stock’s 50-day $135 as a great opportunity to buy the dip on this rejuvenated industrial name.
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.