Strong Start To Earnings Season

April 12, 2019

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2 min read

The market continued marching higher this past week as earnings season officially began. The market is moving higher as the major indices are now, once again, flirting with fresh all-time highs! The fact that this market refuses to fall is extremely bullish and is setting the stage for a climax run similar to what we saw back in 1929 and 1999. It’s still not clear if that is going to unfold that way or if the market will continue to grind higher. Stepping back, in the short-term the market is very extended and due to pullback. In the long-run, the bulls remain in clear control as long as the major indices continue trading above December 2018’s low. Looking forward, we are entering the heart of earnings season over the next few weeks and want to see how the market and individual stocks perform as they report earnings.

Monday-Wednesday’s Action:

Stocks ended mixed to mostly lower on Monday as investors waited for earnings season to begin. Shares of Boeing BA and General Electric GE dragged the Dow lower after both stocks were downgraded for separate reasons. Elsewhere, the Nasdaq and the S&P 500 eked out a small gain. The big news on Monday came after several high profile billionaires said capitalism was broken due to income disparity and said taxes should be raised to level the playing field. On Tuesday, the Dow fell about 200 points after fear spread regarding earnings. The selling didn’t last long because the market rebounded nicely on Wednesday after Delta DAL, Levi Strauss LEVI and several other well-known companies reported earnings. In other news the European Central Bank held rates steady and expressed concern regarding the global economy.

Thursday & Friday Action:

The market was relatively quiet on Thursday as investors waited for the big banks to start reporting earnings on Friday. Stocks rallied hard on Friday after JP Morgan JPM and Disney DIS gapped up. JPM gapped up after reporting earnings and shares of Disney soared after the entertainment giant said it was releasing a new streaming services, Disney+, and pricing it at only $6.99/month – that is half of Netflix’s NFLX monthly rate.

Market Outlook: Bullish Tailwind Continues

The market remains very strong after the Federal Reserve reversed its stance and moved back into the easy money camp. Near-term resistance is 2018’s high while near-term support is March 2019’s low, then the 200 and 50 DMA lines, and then 2018’s low. As always, keep your losses small and never argue with the tape.