Earnings uncertainty.

Reading through weekend headlines there seems to be talking heads all over the spectrum.  One will almost giddy with bullishness and the next profession extremely bearishness.  Blah, blah, blah.  Although they all seem so very self-assured, as to they’re correctness the truth is they are as uncertain as we all are and just talking up their positions.  So what’s a retail trader to do with so much earnings uncertainty?

Remember that Price is King!  Focus on price action without bias, and directional clues will always present themselves is we patiently wait for them.  Easier said than done.  Especially for those caught up in the myth that they have the power to predict.  I gave up the idea that I could predict years ago and dedicated myself to simply following price.  It’s the institutions with their trillions of dollars that determine the direction of a stock.  As retail traders, we can hitch a ride if we stop predicting and learn to follow price action.  Supporting my family as a full-time trader for the last 13 years is a testament to that truth.

On the Calendar

On the Economic Calendar, this Monday the Chicago Fed National Activity Index kicks of the day at 8:30 AM Eastern and is not expected to move the market.  However, the PMI Composite Flash at 9:45 AM and Existing Home Sales at 10:00 AM could easily move the market.  First, the PMI expects a reading of 54.6 overall with manufacturing at 55.0 and services coming in at 54.5 according to consensus forecasts.  Secondly, the Housing Starts consensus expects a slight decline to 5.528 million annualized units vs. the 5.540 April reading.  After that, we have three bond events to wrap up the calendar day before noon on the east coast.

Today begins the heaviest week of earnings reports this season with just over 100 expected to report today.  Before the bell, we will hear from HAL, HAS, KMB & OPB to name a few.  After the bell, all eyes will be on GOOG, GOOGL, CNI & AABA.

Action Plan

With so many earnings reports this week, prepare for the possibility of big gaps, whipsaws and fast price action, particularly in the morning session.  Thus far, earnings by in large, have come in pretty strong and analysts seem to expect positive results to continue.  The big question is will it be enough to impress a nervous market with AAPL moving lower and 20-year treasuries moving up toward 3%.  Futures markets have been under pressure most of the night as markets sold off around the world due to interest rate worries.

Currently, the Dow futures are trying to recover from overnight lows but suggest a flat to slightly bearish open.  That, however, could quickly change as earnings reposts roll in this morning.  We should plan for considerable earnings volatility and fast price action around the open for the rest of the week.  Keep a very close eye on price action for directional clues.

Trade Wisely,

Doug