Earnings season: consider this…
Kevin Haggerty is
the former head of trading for Fidelity Capital Markets. His column is
intended for more advanced traders. Kevin has trained thousands of traders
over the past decade. If you would like to be trained by him,
ext. 1.
It is earnings season
again, and for the media this is like the “Midnight Madness” or the
“Final Four.” Better by a penny–less than a penny, etc., as all they have to do
is read the monitors for the numbers and forget about quality of earnings. They
should go back and look at many of the bear markets where stocks kept declining
as earnings kept advancing. All attempts at clarifying the quality of earnings
have gone by the boards, which would prevent most of the nonsense we’ve seen so
far over the last five days with all the flip-flopping on each individual stock.
(No pun intended, Kerry). The Street is pushing hard to keep people in the
market with their spin on the earnings and economy. If earnings were supposedly
up 20% in 2004, why did the Dow finish slightly red and the S&P was just +3.0%?
So far, Q4 earnings are coming in under 14% from the expected 16% and look to be
single-digit without energy profits. You would never know that by the media and
talking heads’ spin that very often hypes the hoped-for good and ignores the
negative.
Getting “back to reality,” the SPX went out at
1266.86, +0.2% yesterday, which is not much of a bounce after the knife down on
Friday to 1260.92. The intraday high was 1271.47, back to the beginning of what
is now minor resistance through 1276. The SPY volume on Monday (SPX +0.2%) was
67 million, which follows Friday’s spike down of 115 million. The SPY volume
dropped to 53 million yesterday as the SPX was also +0.2%. NYSE expanded to 1.88
billion shares, with the volume ratio positive at 65 and breadth +1190. For
three days, the SPY lows are right at the 50 DEMA (126.10) and the 10/13
trendline (start of rally ). Energy stocks were soft yesterday, with the
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-1.1% vs. Monday’s +2.4% gain. They are obviously very extended but keep getting
more extended and are bought on all retracements. We had good moves yesterday
from Focus List copper stocks like
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retracement to the 50 DEMA.
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20 DEMA. So if they come for them, we’ll be ready. The energy stocks and
precious metals–along with the semis–is where we expected the action to be
starting in 2006, and that is what we got, and I don’t expect that to change for
daytraders can capitalize on the expected continuation of volatility.
Have a good trading day,
Kevin Haggerty
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