A Bad Start to Earnings Season?

GOOGL and MSFT are on tap tonight.

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Our View

Morgan Stanley strategist Mike Wilson — who made some great calls during the bear market — said the “Next rally attempt will fail as investors are punishing earnings reports.” Wilson is pessimistic and is saying the earnings season is going to be a disappointment.

Further, Wilson says the market has reacted more negatively to results than even what he called the “sell-the-news” second quarter. The average one-day stock price change for a company reporting results so far is a drop of 1.6%, compared to a decline of 0.5% last quarter. Relative to the broader market, the average company reporting sees a 0.8% drop, versus a 0.2% dip last quarter.

I think he’s right.

Earnings are set to fall, but I’m not sure how much of an impact that’s going to have on the broader market as we go into the end of the year. We are already in a downtrend. As I have been saying, there is a gamut of problems and the earnings weakness will just add to the list.

MiM and Daily Recap

The ES sold off down to 4215.25 on Globex and opened Monday’s regular session at 4231.25. After the open, the ES rallied up to 4235.75, sold off down to 4213.25 at 9:44 and then rallied up to 4252.50 at 10:26. From there, it sold off down to the VWAP at 4236.25 at 10:37, then rallied 12 straight points up to 4249.75 at 10:45, stutter-stepped up to 4280.75 at 1:00 and then sold off down to 4255.50 at 2:20. As you can see, lots of programs hit on the half-hour marks.

After the pullback, the ES rallied back up to the 4268.00 level and dropped down to 4245.25 at 3:24 as the early imbalance showed $139 million to buy. From there it rallied up to 4252.00 and double-bottomed at 4240.75 at 3:40 and traded 4246.75 as the final 3:50 cash imbalance showed $2.3 billion to sell. The ES traded down to 4238.25 and traded 4242.00 on the 4:00 cash close. After 4:00, the ES rallied up to 4250.50 and settled at 4250.75 on the 5:00 futures close, down 6.75 points or 0.16% on the day.

In the end, with the bonds up 3 points I should have known the futures would rally. In terms of the ES’s overall tone, there were a lot of buy-and-sell programs all day. In terms of the ESs overall trade, volume was lower: 337k traded on Globex and 1.58 million traded on the day session for a total of 1.91 million contracts traded.

Technical Edge

Guest Post — HandelStats

As some of you may be aware, I regularly analyze Ichimoku charts every morning. This practice helps me gain a broad understanding of the market and often offers valuable insights into potential market movements, whether they are likely to rise or fall. Ichimoku charts also help identify which group of traders – short-term, intermediate-term, or long-term participants – is currently in control of the market. It’s important to note that, like any charting method, Ichimoku is just one tool among many that I use for my analysis.

Occasionally, I’ll share Ichimoku charts with you and provide explanations of what I observe. With this in mind, I’ll also offer some lessons on the components of Ichimoku and how I interpret them. To begin, I’ll present the first two charts that depict the core elements of Ichimoku, along with additional components I incorporate to extract more meaningful information from the charts.

Economic Calendar

Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.

Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!