The Mighty Stumbles

Even the mighty stumbles from time to time as the highly anticipated report from NFLX disappoints the market and weighs heavy on the entire tech sector.  Undoubtedly you will hear from traders see posts in social media today about those that made a bundle on the $50 point fall in NFLX after the bell yesterday.  I say congratulations to them for a winning position, but don’t believe for a second they have the powers of prediction.  Remember there were likely even more traders that lost a bundle betting that NFLX would move up sharply as it has done for years.

That’s right I used the word betting because trading earnings is very much the same as placing a bet on red or black at a roulette table.  We have all seen stocks sell off after good earnings reports and stocks rally after bad earnings reports.  There is no way to know for sure how the market will react to an earnings report.  If you make a habit of gambling on them, you’re not likely to be in this business very long.  Think about it; we only seem to hear from those that bet and win after the fact, and we never hear about there big losers.  Hmmm, I wonder why?

On the Calendar

We get the Economic Calendar going at 9:15 AM Eastern with the Industrial Production report.  Consensus expects a gain of 0.6 overall with Manufacturing up 0.8 percent in June while capacity utilization pressures rise to 78.3 percent.  At 10:00 AM the home-builder confidence is expects to hold steady at 68 according to consensus in the Housing Market Index report.  We also have a Fed Speaker at 10:00 AM and two bond auctions at 11:30 which are unlikely to move the market.  Wrapping up the is Treasury International Capital at 4:00 PM which tracks the flow of financial instruments but is not forwardly forecast.

On the Earnings Calendar, we have 42 companies reporting as earnings session ramps up activity.  Before the bell, we will hear from GS, JNJ, PGR SCHW & UNH  to name a few impacting the morning open.  After the bell, UAL, CSX, IBKR, & LTXB are among those fessing up to results.

Action Plan

High expectations turned to deep disappointment after the bell yesterday when NFLX reported earnings results.  In aftermarket trading, the stock fell more than $50 a share dragging down other tech shares in reaction to the news.  The QQQ’s in the pre-market is pointing to a lower open and may raise concerns about the performance of the tech sector as we wait for more big companies to report.  Currently, the Dow Futures are suggesting a flat to slightly bearish open as I write this but there are several big earnings reports yet to happen that could easily change that.

Financials had a very good day yesterday, and if that continues perhaps, that will help the Dow stabilize its wild price action of late.  Let’s hope for the best but prepare for the worst as it appears this could be a wild earnings session.  The markets hates uncertainty, and the NFLX just reminded everyone that there is nothing certain when it comes to earnings reports.

Trade Wisely,

Doug