Wednesday, October 26, 2022

Morning Note: Earnings Misses Warrant (at least) a Pause in the Rally...

In yesterday's morning note I suggested that it may not take much, in terms of a negative earnings surprise or two, to see traders turn tail amid what is otherwise a pretty bullish short-term setup.
"Now, positive seasonality and technicals aside, let's not forget that this remains a bear market... And as I've explained herein, and on the videos, it's during bear markets where bullish technical setups are the most fragile, and ---prone to failure.

Plus, this is a monster week for earnings, with a third of SP500 members reporting... It wouldn't take much (during a bear market) in terms of a big fish (like, say, an Apple) or two missing the mark to have traders quickly turning tail... Of course, given the bullish (near-term) backdrop, positive earnings surprises could see stocks gaining some serious upside momentum from here."

While Apple's yet to report, Alphabet (Google), Texas Instruments and Microsoft did the dirty work after the close yesterday. 

Here's Bloomberg:
The quarterly updates from Microsoft Corp., Alphabet Inc.
and Texas Instruments Inc. underscored growing pressure on
everything from corporate IT budgets to digital ad spending and chips for industrial machinery. Nasdaq 100 Index futures lost as much as 2.4%, reversing an earlier rally on Tuesday, as the results refocused investor attention on the damage to earnings and the economy from the Federal Reserve’s rapid interest-rate hikes.

While the US market -- in bullish fashion -- didn't flinch after China's Monday plunge, clearly, last night's earnings releases warrant, at a minimum, a pause in what we still view (for the moment anyway) as a potentially meaningful Q4 bear market rally.

We'll dig a little deeper in our mid-week snapshot -- which is on deck this morning.

Asian equities were mostly green overnight, with 12 of the 16 markets we track closing lower.

Europe's struggling so far this morning, with 15 of the 19 bourses we follow trading down as I type.

US major averages are mixed to start the session: Dow up 98 points (0.31%), SP500 down 0.53%, SP500 Equal Weight up 0.42%, Nasdaq 100 down 2.06%, Nasdaq Comp down 1.97%, Russell 2000 up 0.44%.

The VIX sits at 28.23, down 0.81%.

Oil futures are up 1.36%, gold's up 0.70%, silver's up 0.95%, copper futures are up 2.92% and the ag complex (DBA) is down 0.15%

The 10-year treasury is up (yield down) and the dollar (coming way off its premarket high) is down 0.64%

Among our 34 core positions (excluding options hedges, cash and short-term bond ETF), 25 -- led by oil services stocks, base metals futures, base metals miners, uranium miners and AT&T -- are in the green so far this morning. The losers are being led lower by AMD, tech stocks, communication stocks, Dutch Bros and Brazil equities.

In politics, there are no ethical deeds. What renders an event ethical is merely a well-argued interpretation or an insufficient perspective.

--Andrei, Vizi. Economy of Truth 

Have a great day!


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