It’s that time of year again … earnings season gets underway this week and could be the much-needed catalyst to break the markets’ deadlock. Friday is a big day for the banks with JPMorgan (JPM), Citigroup (C), and Wells Fargo (WFC) all reporting. With a large wedge in Financials (XLF) nearly complete, it could be time for banks to re-join the broader market rally.
That said, banks won’t make or break the indices. The main focus will again be on FAANG (or FAAMG), and the oversized contribution they make to the S&P500.
These stocks can make all the difference as Apple illustrated last earnings season when it led the S&P500 higher just when it looked vulnerable.
A feature of last earnings season was that FAANG stocks – especially FB, AAPL and even AMZN – were under pressure leading into earnings, but the release changed focus back to the positives and helped ignite rallies to new highs. We could say the same is true again as the patterns look very similar (although smaller).
Actually we have been tracking these patterns for some time now, and they should provide a valuable edge leading into earnings, and perhaps allow us to take options into earnings trades with added confidence.
As usual, Netflix (NFLX) will be the first to report (Monday 16th July) and has an interesting technical set-up.
Earnings season will at least change the market narrative away from trade disputes for a while, and provide some volatility and trade opportunities. Perhaps it will even be the trigger to re-ignite the underlying trend in indices, but we can only hope for so much; the situation looks much as it did last time around and the action could well be in individual stocks once again.
Good luck and good trading.
Chief Stocks Analyst
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