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Trading the Trend

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Pre-COVID JPM had one of the strongest balance sheets (of the sector) and their primary value indicators were stronger than their competition, so it doesn’t surprise me that they have beaten expectations on earnings.

Delta have posted worse than expected losses.
 
They're not providing any forward guidance or earnings estimates or anything - even the talking heads on the news are admitting that nobody really has a clue what's in store next. Buybacks are postponed until Q4 though.

Spaniel - Yeah I just saw delta's revision.

I'm planning on nothing but holding for this week, seeing how each sector does over the 5 days of the week, then working out if I might pull a couple of triggers after that.

All my positions are green in pre-market and all the major indices futures are green so yesterday's bloodbath is looking unlikely to repeat.
 
Wells fargo is in. Dividend was estimated to be 20c, they're paying half that. First quarterly loss since 2008. Down 3% in premarket. Citi's up 1.5% so banks are mixed. Global virus cases crack the 13 million mark. U.S cracks 64,000 in a single day. Tech-heavy nasdaq futures now highest. All my positions are still climbing pre-market. Tech seems to be the port in the uncertain storm just like it has been. Feeling positive.
 
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Pre-market gains pretty much wiped on the open as far as I can see, fairly big sell off to start the day. Nasdaq down, s&p500 almost even. Boeing propping up the S&P with the announcement of the billion dollar Air Force contract, along with JPM on back of earnings surprise.
 
So the Banks:

The headlines:



Earnings down as majors set aside loan loss reserves. Nothing particularly shocking there.

The banking sector, which includes the smaller regional banks, obviously yet to report:



Down, but on a technical basis, definitely not out. As the dust settles, they look as if they could go higher. Early days yet. See how they go next week.

Sectors:



Everything (for a supposedly bad report) holding up well. XLF slightly down. So far, so good.

jog on
duc

* Credit spreads have tightened back, QQQ intra-day is a buy on the internals

 
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Agreed about the whole clown world thing.

Remember back at the start of june when everything went nuts moving into energy & industrials thinking we were returning to return to normal after the overwhelmingly positive economic data (unemployment rate etc) and then just as quickly nosedived after everyone realised that they might have jumped the "we've turned the corner and are returning to normal" gun a bit?

Here's where the indexes closed:



I'm getting a bit of deja-vu.
 
Big vaccine news out of moderna. 16% rally on the news. Which means a big curveball for the market(s). All the indices are trading the same level & ratio's of futures as yesterday, which might mean a similiar result to yesterday. If so, we might be starting to see the pivot duc mentioned.

I'll check in later as I need my beauty sleep.
 
I find myself up very early.

News from ZM:





I don't really bother with individual stocks nowadays. However this seems to be a poster child for the current tech. boom (excluding the FAANGMA) stocks. As I saw the headline, why not have a look. The bulls do not want a break below that blue trend line.

jog on
duc

 
My main man flippe-floppe-flye dealing with adversity from yesterday.




Just thought I would leave you with that inspiring message as I head back to bed.


jog on
duc

 
Last one:

While there has been a great focus on the run-up of the largest American equities, the biggest European stocks have also been on the rise in recent weeks. The STOXX 50 (FEZ) is made up of some of the largest companies by market capitalization in the broader Euro STOXX index. In May and the first week of June, FEZ ripped higher before stalling out around 8.5% away from the January 1st 52-week high at $37.24. After sitting below that June high for the rest of June and first half of July, FEZ is finally looking to make a new high today. It is trading up over 2% pre-market which would send it over 1.5% above that June 8th high.



jog on
duc
 
Earnings data.

Assuming that you are not day trading, then earnings reporting season can break a promising trend in individual stocks. Less of an issue if you are trading a sector, even less of an issue if you are trading a market (SPY, QQQ, etc). What to watch out for.

Below is a list of the 35 largest stocks set to report over the next month. For each stock, we include its current consensus analyst EPS and sales estimate along with its historical EPS beat rate and its average one-day share price change on its earnings reaction day (on an absolute basis). This lets you see how volatile a stock typically is in reaction to its earnings report.

Of the 35 largest stocks set to report, Apple (AAPL), Facebook (FB), Johnson & Johnson (JNJ), Mastercard (MA), Cisco (CSCO), and AbbVie (ABBV) have topped analyst EPS estimates the most often at 89% of the time or more. In terms of share price volatility, stocks like Netflix (NFLX), Tesla (TSLA), and Amazon (AMZN) typically experience a one-day move of more than 8% (in either direction) on their earnings reaction days. On the flip side, stocks like JNJ, Verizon (VZ), Exxon Mobil (XOM), and Chevron (CVX) typically see a one-day change of less than 2% on their earnings reaction days.

On an average basis, the 35 largest stocks set to report over the next month are much less volatile on their earnings reaction days than all stocks set to report. Whereas all stocks set to report over the next month have historically seen their share prices average a one-day move of +/-5.57%, the average one-day move of the 35 largest stocks in reaction to earnings is just +/-3.84%. In terms of beat rates, the largest stocks typically exceed EPS estimates at a much higher rate than average as well (75% vs. 61.5%).



Moving on, below is our list of the 35 stocks set to report over the next month that typically see the biggest moves in reaction to earnings. To make the list, the stock must have at least five years worth of quarterly earnings reports. Each of the stocks listed below typically moves at least 11% up or down on its earnings reaction day (the first trading day following its earnings report). The Container Store (TCS) is the most volatile stock on earnings with an average one-day change of +/-16.8% after it reports. TCS is scheduled to report after the close on Tuesday, July 28th.

The next most volatile stocks in reaction to earnings which all average one-day moves of more than 15% are Enphase Energy (ENPH), Groupon (GRPN), and Infinera (INFN). While GRPN and INFN are both down 20%+ YTD, ENPH is up 113.9% on the year, which means expectations for its upcoming report on 7/30 will be sky-high.

Other notables on the list of most volatile stocks in reaction to earnings include Wayfair (W), Yelp (YELP), LendingTree (TREE), Chegg (CHGG), Twitter (TWTR), Netflix (NFLX), Etsy (ETSY), and Grubhub (GRUB).

As shown in the table, Netflix (NFLX) is by far the largest stock on the list with a market cap of $230 billion. The next largest stock on the list -- Twitter -- has a market cap that's just a tenth of NFLX. Even though it's now an established blue-chip S&P 500 company, NFLX still typically sees huge moves when it reports its quarterly numbers. We'll get to see how the stock reacts to its Q2 2020 report soon as NFLX is set to report Thursday after the close. Earnings definitely do not usually give shareholders a chance to "Netflix and chill."



The reasons for the above are myriad. One of them is that the large mega-caps tend to have real (stable) earnings. The new up and comers may have no earnings but are being gauged on new signups etc. A growth story can be derailed in a heartbeat, whereas real earnings, even if down, tend to greater stickability.

jog on
duc
 
Revisiting a post from 'Market Bottoms':



The important point is point #1. Data that signals improvement. We have had a fair bit:
(i) improving employment;
(ii) improving housing data;
(iii) good bank data (re. Balance Sheets) and confirmed yesterday;
(iv) improving sentiment (I don't weight that too heavily);
(v) improving prices in markets;
(vi) Dr Copper moving steadily higher;
(vii) and

The New York Federal Reserve released its July reading on the manufacturing sector this morning and for the first time since February, the headline index indicated that activity rose month-over-month in the region. Not only was it the first expansionary reading (those above 0), but at +17.2, it was also the highest level of the index since November 2018 when it stood at +21.1. This month also marked a third consecutive monthly increase.

Although the index for present conditions is showing some of the strongest levels of the past couple of years with another uptick in July, optimism for the next six months pulled back. The index for general business conditions six months in the future fell to 38.4 from a multi-year high of 56.5 in June. That 18.1 point decline was the largest since March's 21.7 point decline and the ninth-largest decline of all months.



While the pickup in activity was not as large as last month, for multiple individual categories the gains were still in the 90th percentile or better of all periods. Conversely, the declines in the indices for expectations for General Business Conditions, New Orders, and Shipments were all in the bottom decile of all readings. This month's report also marked a turn for a few components as they changed from contractionary to expansionary. This was the case for the indices for General Business Conditions, New Orders, and Number of Employees. Now more than half are expansionary.



The two indices that rose the most this month were those for New Orders and Shipments. For the index for New Orders, it was the first non-contractionary reading since February, and for Shipments, it marked back to back readings above 0.



One major positive of this month's report was the reading on employment. After four straight months of a greater share of manufacturers reporting decreases in employment, July marked an equal share of companies reporting an increase in employment as a decrease (21.9%). Additionally, the reading for future expectations rose to its highest level since August of last year indicating companies are at least expecting to increase hiring in the near future. Although employment was stabilized, average workweek did continue to fall, albeit, not by as much as previous months.

Jumping to Reason #3. The US economy cannot close down. It may operate in a different way. It may be less efficient for a time. But it will operate. Therefore economic data will improve. Stocks will move higher, at least until the next crisis. All the talk about the virus, while interesting, has a gossip component and is essentially wasted breath and pixels.

If you really want to understand what makes a market fall, study the onset of the various bear markets. There is a significant amount of history out there. The current conditions (virus) do not fit that pattern or patterns.

jog on
duc
 
Breaking down the Manufacturing data:

U.S. manufacturing production fell 20% between February and April and has since recovered almost half of that loss in just two months. But the story looks a lot different when focusing on particular sectors. Motor-vehicle output in June was 4.5 times what it was in April, but in many other categories, there has been much less of a recovery.

The easiest way to see this is to compare total industrial production excluding energy extraction, refining and distribution (a good proxy for what most people think of as manufacturing, although it still includes categories such as packaged foods) against the same index excluding semiconductors and motor vehicles and parts.

Not Back YetThe U.S. manufacturing sector has recovered almost half of its losses since February,but the picture looks different excluding the automotive sector



Both indexes are down around 11% compared to pre-virus levels, but the swings in the broader non-energy segment are both more dramatic and more symmetrical. Excluding motor vehicles and semiconductors reveals a slightly shallower drawdown (15% versus 20%) and a much more modest recovery (5% versus 11%).

Another way to see this is to focus on the two sectors that bore such a large responsibility for the total decline: motor vehicles and aircraft. (Together they account for almost 14% of total manufacturing production.) Data from the Census Bureau show that these segments of the transportation industry accounted for much of the decline and subsequent rebound in manufacturing orders and shipments.


The new Federal Reserve industrial production data show they also experienced much more volatile changes in production, with motor-vehicle output crashing 83% from February to April and aircraft production down 32% (although it had been falling earlier for other reasons). Both sectors have recovered sharply, although both remain well below pre-virus levels. The manufacturing downturn and the subsequent rebound were both concentrated in the transportation sector

Driving the Rebound


On the other side are sectors such as metals, machinery, and electrical equipment, which together account for about 22% of total manufacturing production and almost half of durable goods production. They fared comparatively better than motor vehicles and aerospace during the downturn but have also had much weaker recoveries. On a weighted-average basis, production in these sectors fell 19% during the downturn were still down 15% in June.

Missing the ReboundManufacturing production of primary metals, fabricated metal products, electrical equipment, and machinery has barely recovered from the trough.



The big question is whether the weakness in production is the natural response to weak demand or whether supply constraints are preventing manufacturers from making as much as their customers want. We’ll get more insight into that soon with data on retail sales and trade.

jog on
duc
 
When Russell is up nearly 4pc and nasdaq at .7, i think we are seeing a reversion with tech losing against the rest, yet in a still bullish market.
I sold my tech etf (vanguard) and bought silver miners etf instead
Silver will go up if economy grows and if we have a crash.
Kind of levelled bet.
time will tell but still bullish.
ASX wise might be different as we are still a war behind and will soon be hit by the first wave.
good thing is we are much better at treating people but i still expect an end of the world narrative with clear effect on psyche and local investment.
ASX maybe not the place to be in next 6 months, nor AUD
 
We had thinking like this at the start of june though frog, and remember what happened then?

If the trend continues to the end of NEXT week, then it's time to start pulling triggers.
 
At the close:



So we are pretty much sitting at resistance. I'll update later and we'll have a look at the probability moving forward to the all time high and beyond.

jog on
duc
 
Friday will be key. Profit taking friday always exposes peoples' real confidence.

If monday/next week keeps heading in this direction, then it's time to switch.
 
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