When’s The Last Time Earnings Missed?
The S&P 500 futures (ESZ19:CME) closed Wednesday’s trading session at 2989.69, right where it opened and pretty much in the middle of its trading range (2985.20 – 2998.54), after closing at 2995.65 on Tuesday.
Despite comments that the days of revenue misses were behind it, the street did not buy it, with the stock tanking more than 5% in after hours trading.
IBM beat estimates by a couple pennies, but missed revenues for the fifth quarter in a row. Netflix rallied on a significant earnings beat, even though it missed on subscriber growth. Alcoa and CSX beat as well, but not to the same degree as Netflix.
It’s still early in the earnings season, but the trend is far from the exuberance the markets have experienced over recent quarters.
On the MarketProfile screenshot below, the daily VPOC held its ground. More importantly, higher and higher VPOC’s, as shown, have created an upswing in the 20-day moving average, a good sign for market bulls.
The U.S. markets traded congruent with the VWAP most of the day, which wasn’t tested until after hours, then as it did prices swung higher, but uncertainty still remains. Maybe someone has better information than the rest of the market participants, or they are just speculating that Brexit is a done deal.
The overnight low, like Tuesday, was never really tested either during regular trading hours, but the market hit its head slightly below the 3000.00 level.
Brexit controls the rest of the week, despite the fact that earnings should continue to be positive. EU Council Donald Tusk suggests that clarity will permeate the markets before the U.S session. We’ve heard that before, but what is clarity? Is today really the deadline for a Brexit deal? Quite frankly, it is not.
Prime Minister Donald Johnson’s Conservative party hit the 37% mark in recent polling, a 15 point lead over rival Jeremy Corbin’s opposition party. But what does that have to do with this weekend’s up or down vote? It means more and more that this weekend will be just like many others that preceded it. In my opinion, this melodrama is headed for another vote in the UK around Christmas, whether there is a Brexit deal or not.
In other words, hurry up and wait, but the trend in the Pound, despite all of the volatility, should remain on the upside. If the Euro catches wind, as expected (see longer term 6E MarketProfile chart below) by most of the research we are privy to, the Dollar is going to go lower. That’s music to Trump’s ears, and ours too.
Building a manufacturing economy, coupled with a weaker currency, fuels economic momentum.
All in all, it looks like the longs have a good shot to be in command today. With earnings starting to hit the street at the end of the overnight session heading into regular trading hours, the opening could prove to be interesting.
Mark Carney, of the Bank of England, didn’t move the needle one way or the other yesterday, which was expected. His hands are “politically” tied by the uncertainty surrounding Brexit. One thing is becoming more and more clear, there is going to be a Brexit deal, one way or another, it just might wait and be wrapped up and under the tree for Christmas.
GDP numbers for China (if you believe what they report, I have some beachfront property you might like, it’s only under water twelve hours a day) come out tomorrow night. There is no reason for the Chinese to accurately report these types of data when a trade deal hangs in the balance.
Underperforming numbers illustrate that Trump is right and Xi is wrong, and that’s more than likely not going to happen. It’s doubtful that international CPI’s are going to create havoc in the debt markets, especially after the EU’s release showing a further decline in estimates. It’s tough to make money, especially in consumer non-durables, when price increases do not cover increases in costs.
I’m on the sidelines right now, other than positions taken prior: long KC, ZN, 6B & 6E, plus short DX. I’m getting close to initiating a long on NG, just not in the widow maker’s wheelhouse yet. That will change on the first forecast of the coldest winter ever, which usually happens in early November when those mavens take to the air waves, and we can wait.
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