Earnings Season Is Upon Us

Most of the current market focus is on the escalating tensions between China and the U.S. regarding trade and human rights issues, the impeachment process between the Democrats and the Trump team along with slowing global growth. A key development to watch now is the upcoming earnings season in the U.S. For investors and traders to be comfortable buying U.S. stocks in this environment, we think they need to see earnings deliver.  Analysts, according to FactSet estimates that earnings per share for S&P 500 companies fell by just over 4.0% in the past quarter. As most companies are clever to guide down expectations, so they can deliver, we will most likely see a third quarter in a row with a drop in earnings.

China/ U.S. trade talks will take place the next couple of days. It is hard to find anyone that thinks we will get a broad, all-inclusive deal that tackles the most difficult issues, but there is some hope of a partial deal and a commitment to continue working on the key issues.

We think a partial deal will put the market at some ease in the short term. We are uncertain how the equity markets will react.

  1. Partial deal helps ease nerves and the key support levels now being tested will hold for this week.
  2. Partial deal, although a positive, is just window dressing and the market sees through it and breaks the key support.
  3. No deal: will send the market lower through support and could lead to a 3% to 5% lower move.

Key events:

After a heated argument between PM Johnson and Germany’s Merkel, Boris fights on to save his customs border plan.

U.S. troops to be pulled out of Syria, allowing Turkey’s military to cross the border with Northeast Syria.

U.S. tensions with China spread from trade, to penalizing Chinese authorities associated with the treatment of minorities.

Producer prices in the U.S. came in lower than expected 1.4% vs 1.8% expected. YOY

Improvement in Exports for Germany to non-Eurozone countries.

S&P 500 index CFD: We think a close below 2,880 opens for a test lower.

This chart of iShares High Yield Bond ETF worries us and should make equity bulls nervous as well!

Crude oil is holding the important $58.00 level as we watch the trade talks develop the next few days.

The USD is holding near the highs of the recent move and has support on the index just under current levels.

On the Saxo platform, clients can trade the relationship between gold and silver via CFD.  Currently resting at 84.50, middle of the range the past year.

Contact us if you are interested in receiving real time trading signals. In doubt? Check out our track record below!

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