Good Saturday morning to all of you here on r/StockMarket. I hope everyone on this sub made out pretty nicely in the market this past week, and is ready for the new trading week ahead.
Here is everything you need to know to get you ready for the trading week beginning October 21st, 2019.
Stocks will likely hit new records in the week ahead if earnings keep topping expectations - (Source)
Stocks will try in the week ahead to break the all-time highs set earlier in the year as a slew of S&P 500 companies get set to report.
The S&P 500 and Dow Jones Industrial Average are both around 1% below their all-time highs while the Nasdaq Composite is about 2% away from its record. The indexes got a lift this after a big chunk of this week's reporters posted better-than-expected results. They were also boosted by improving sentiment around Brexit and U.S.-China trade negotiations.
The all-time highs could be tested as about 120 S&P 500 companies, or around 24%, are scheduled to release their quarterly results in the week ahead. Some of those companies include Caterpillar and Boeing, both of which are expected to report Wednesday before the bell. Amazon, Intel, McDonald's and Chipotle Mexican Grill are also on deck for the week.
"You've got the potential for a combination of things that drive us to new highs," said Art Hogan, chief market strategist at National Securities. "At the same time you're getting better micro data in the earnings, you're getting better news on the macro hurdles facing us."
More than 14% of S&P 500 companies have reported through Friday, FactSet data shows. Of those companies, 81% posted earnings that beat analyst expectations.
J.P. Morgan Chase's report on Tuesday sent the stock to an all-time high while Citigroup and Bank of America also got a boost from their earnings releases. Netflix, meanwhile, briefly rallied around 7% Thursday before ending the session up 2.5%. Morgan Stanley advanced 1.5% on earnings. Coca-Cola climbed more than 1% on Friday after releasing its quarterly numbers.
To be sure, the companies are being rated on a very low bar this earnings season. Analysts polled by FactSet expected third-quarter earnings to have fallen by 4.6%.
"Earnings can be a positive catalyst to the extent that expectations are pretty low," said Dan Russo, chief market strategist at Chaikin Analytics. "The bar has been lowered to the point where companies can jump over it."
But investors might have a harder time digesting the week's reports.
Companies such as Caterpillar are heavily affected by the U.S.-China trade war given their exposure to overseas markets. Boeing and Intel also have overseas exposure. Meanwhile, reports from companies such as Amazon, McDonald's and Chipotle will be heavily scrutinized as investors look for clues on how the consumer is doing.
"Trade frictions and the global economic slowdown have clearly affected 2019 earnings growth thus far," Scott Wren, senior global equity strategist at Wells Fargo Investment Institute, said in a note. "The third-quarter earnings reporting season will likely confirm that those negatives continued to pour over into last quarter's results."
The good news for investors is recent trade talks appear to have yielded some progress. President Donald Trump announced Oct. 11 the U.S. and China had reached a "very substantial phase one" deal. Multiple reports this week said China wants additional talks before signing off on the first phase, but National Economic Council Director Larry Kudlow said Thursday there is "a lot of momentum" to finalize the deal.
John Augustine, chief investment officer at Huntington Private Bank, said the "narrative" around trade had gotten "so one-sided to the negative side, there may be a better chance than not that a phase-one deal is signed."
Meanwhile, preliminary figures on consumer sentiment showed a slight increase in October from September. The final consumer sentiment numbers for the month are scheduled for release on Friday.
"If corporate earnings show signs of resilience, especially by the U.S. consumer, then a run to new highs is by no means out of the question," Tom Essaye, founder of The Sevens Report, said in a note.
This past week saw the following moves in the S&P:
Major Indices for this past week:
Major Futures Markets as of Friday's close:
Economic Calendar for the Week Ahead:
Sector Performance WTD, MTD, YTD:
Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday's close:
S&P Sectors for the Past Week:
Major Indices Pullback/Correction Levels as of Friday's close:
Major Indices Rally Levels as of Friday's close:
Most Anticipated Earnings Releases for this week:
Here are the upcoming IPO's for this week:
Friday's Stock Analyst Upgrades & Downgrades:
The Calendar Could Have Bulls Smiling
"History doesn't repeat itself, but it often rhymes." — Mark Twain
Stocks have continued their surprising strength in October, thanks to a potential thaw in the U.S.-China trade dispute. And remember, the S&P 500 Index has been lower in October during a pre-election year only once since 1987. Additionally, over the past 20 years, October has been the third-best month on average for the S&P 500. October has had a bad rap due to some spectacular crashes, but the truth is the month usually is pretty good for stocks.
"The calendar could be about to turn into a bull's best friend, as late October has been when stocks historically started their end-of-year rally," explained LPL Financial Senior Market Strategist Ryan Detrick. "No two years are ever the same, and we all remember last year's sell-off. However, a better than expected earnings season, coupled with positive steps on trade and one more Federal Reserve rate cut this year could allow bulls to smile the rest of 2019."
As shown in the LPL Chart of the Day, we are very near the historically strong end of year for equities. Whether you look at the average year or a pre-election year, stocks have tended to deliver an upward bias starting soon.
Buy in October, and Get Yourself Sober
Folks have become fixated with "Sell In May" but forget to "Buy in October, and Get Yourself Sober." Our Best Six Months MACD Buy Signal that triggered last Friday, October 11th, initially appears to be timely. Friday's Alert detailed several trades that were deployed Monday and updated in a follow up Alert on Monday. In addition to the Seasonal Sector ETF trades and the Tactical Seasonal Switching Strategy Portfolio trades in DIA, SPY, QQQ and IWM we released a New October Stock Basket yesterday!
As you can see in the chart below of the S&P 500 the MACD "Buy" indicator trigger in the lower pane, highlighted in the yellow box with the black arrow, came in strong below the zero line. In the upper pane resistance at 3010 still persists. Aside from this resistance technically things look encouraging. We held support last August above 2815 and have been making higher lows since then, riding the 200-day moving average higher. The 50-day moving average has also constructively turned higher.
As we have been monitoring all year, seasonal patterns for the Pre-Election remain on track, though the October dip came early. Save some truly negative news, the low for the year is likely in. With the market tracking this seasonal pattern so closely all year that suggests the pattern is likely to continue, which means some backing and filing around S&P 3000 through late November before additional new highs toward yearend.
Bonds Bounce Back In Fund Flows Data
The week ended October 9th saw relatively large inflows into bond funds and relatively large outflows from equity funds. Across all mutual and exchange traded funds, equity flows were in the 7th percentile of all readings since 2013, with outflows of $11.5bn. Of that total, $5.8bn was ETFs, with the lion's share of equity fund outflows coming from domestic funds. As has so frequently been the case lately, bond funds were the exact opposite situation. Total bond fund flows across mutual funds and ETFs meant $5.8bn of new cash on the week, which is in the 64th percentile of all periods. ETFs were relatively stronger, with bond funds drawing $1.9bn of inflows, higher than more than 81% of periods since 2013. Within both ETF and combined mutual and ETF flows, municipal bonds were the standouts, with total flows in the top 10% of all periods. Since 2013, $152bn has flowed into mutual funds and ETFs that own municipal government bonds, with more than $90bn of that coming since the end of 2017. Those flows are very likely being driven by tax-advantaged buying incentivized by the changes to the tax code at the end of 2017 which ended a variety of popular state and local tax deductions.
ISM Offsides, If Not Utterly Incorrect
This week's manufacturing activity releases from the New York Fed and Philly Fed showed a slightly weaker but generally upbeat assessment of economic activity. The numbers from these two regional surveys may not be fully representative of the aggregate national economy, but they're usually a pretty good indicator. As shown in the chart below, they've been a decent guide to what the ISM Manufacturing index says about national activity since the Empire State manufacturing index started its releases in 2001.
Unlike these two indices, which have shown a general uptick in activity over the last few months, the ISM index shows a different route. But that data isn't backed up by the average results across the five Fed districts that survey their manufacturers. The size and scale of the divergence is so big that one of these indices is almost certainly wrong, but which?
For a tiebreaker, Markit's manufacturing survey suggests conditions are at multi-month highs and picking up, more consistent with the data from Fed surveys than ISM. Markit's sample size is bigger and the index is more representative of the whole sector than ISM only; with all five regional Fed surveys in the mix, they also have a sample size advantage over ISM. Hard data of late (including manufacturing production, exports, and hiring) has all sided against ISM and is showing data more consistent with the Five Fed or Markit surveys. For now, it looks like the brutal ISM results are a bit overstated.
Nasadaq - One Downtrend Down, Another To Go
In a post yesterday, we discussed the seemingly never-ending rangebound trading pattern for the STOXX 600. It's not just Europe either. Seemingly everywhere you look these days, there's a major equity index stuck in some sort of range. The Nasdaq is just one example of many. At a level of around 8,140, the Nasdaq is at the same level it was at exactly six months ago and also all the way back in August of last year.
Last week at this time, things were looking good for the Nasdaq as the index had bounced off of support at its 200-DMA and broke its short-term downtrend from the September lower high. This week has seen further gains with the Nasdaq rising more than 1%, but that rally looks to have stalled out yesterday right at another downtrend from the July high. A meaningful break of that downtrend would come into play at around 8,200 which is just over half of one percent above current levels. Using our Trend Analyzer tool, of the 100 stocks in the Nasdaq 100, heading into today, 43 were overbought and just five were oversold, so it may take a few days of 'rest' for the index before a meaningful break of that downtrend can occur.
Rangebound on Both Sides of the Atlantic
Everyone here is well aware of the fact that equities have been stuck in what seems like an endless trading range where the S&P 500 has failed to break out meaningfully to new highs. What some investors may not be of cognizant of is the fact that over in Europe, the benchmark STOXX 600 has also been stuck in a trading range of its own. While the index peaked at higher levels in 2015, it subsequently fell over 25% during the global sell-off in late 2015/early 2016. From those lows, the STOXX rallied more than 30% for the next 15 months. Since May 2017, though, the index has been stuck in a range and unable to meaningfully break out to new highs.
This year's performance for the STOXX 600 has been a continuation of the holding pattern that the index has been stuck in since 2017. Earlier today, it looked as though we were getting close to a breakout as the index hit a 52-week high, but late in the European session equities sold-off nearly 1% from the intraday highs finishing near the lows of the day. Oh well. Maybe tomorrow.
What bulls in Europe are hoping is that today's late-day sell-off isn't a repeat of what happened on July 25th. Back then, we saw a similar-looking breakout, but like today, the gains didn't hold and the STOXX 600 reversed over 1% and finished near the lows of the day. From the high on the day of that failed breakout in late July to the August lows, the STOXX 600 went on to fall nearly 9%.
S&P 500 Sector Valuations
The S&P 500's trailing 12-month P/E ratio has ticked up to 19.62 recently, which is close to its highest level of the past year. For valuations to stop expanding on any breakout higher for the S&P, we'll need to see earnings (the "E" in P/E) keep up with price. That's going to be a tough ask for corporate America this quarter, so we may be heading into 2020 with valuations at more concerning levels.
Below are one-year charts of P/E ratios for ten S&P 500 sectors. These charts are included in our weekly Sector Snapshot report sent to Bespoke Premium members. Consumer Discretionary has the highest P/E ratio at 24.15 followed by Technology at 23.38. Tech's P/E has really jumped a lot recently to new 52-week highs. The Financial sector has the lowest P/E of the major sectors at just 13.27.
Open Season For Small Caps
There's been chatter for many moons about the under performance of small cap stocks recently. True they have been under performing since the Russell 2000 index of small cap stocks hit its all-time high close over a year ago on August 31, 2018. However, the trend of under performance tracks the historical small cap seasonality quite well.
With the Russell 2000 up a fraction today as the major U.S. large indices were down a bit from our historical seasonal pattern perspective this looks like the beginning of the bottom of small cap under performance and the beginning of the new "Small Effect."
As you can see in the accompanying chart the R2K has been tracking the pattern quite well since July and looks like the small fry are coming out of hibernation just in time for small cap stock hunting season.
See page 110 of the Stock Trader's Almanac 2019 and page 112 of the soon-to-be released 2020 edition for deep background.
October Back on Track – Earnings Season Ramps Up
After a bumpy start, the market is back on track at the mid-point of October. DJIA, S&P 500, Russell 1000 and Russell 2000 are slightly above average at this point in the month compared to the last 21-year historical average. NASDAQ is comfortably above average and continues to lead. Negative headlines have given way to more upbeat news. Trade headlines are now featuring some progress even though tariffs remain in place and third quarter earnings season is underway with a solid report from JPMorgan Chase (JPM) today. Provided economic data and corporate earnings hold up, the market is likely to continue its run toward all-time highs and October could end with above average gains.
STOCK MARKET VIDEO: Stock Market Analysis Video for Week Ending October 18th, 2019
STOCK MARKET VIDEO: ShadowTrader Video Weekly 10.20.19
([CLICK HERE FOR THE YOUTUBE VIDEO!]())
(VIDEO NOT YET POSTED!)
Here are the most notable companies (tickers) reporting earnings in this upcoming trading week ahead-
- $AMZN
- $MSFT
- $TSLA
- $SNAP
- $MCD
- $BA
- $HEXO
- $TWTR
- $PYPL
- $PG
- $LMT
- $CLF
- $HAL
- $V
- $CMG
- $UPS
- $CAT
- $SAP
- $BIIB
- $INTC
- $AMTD
- $UTX
- $F
- $NOK
- $HAS
- $CNC
- $MMM
- $LII
- $JBLU
- $WM
- $SHW
- $SKX
- $IRBT
- $HOG
- $ANTM
- $NEE
- $XLNX
- $HMST
- $KMB
- $VZ
- $BX
- $CBU
- $TXN
- $ALGN
- $NOW
- $RTN
- $BMRC
Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:
Monday 10.21.19 Before Market Open:
Monday 10.21.19 After Market Close:
Tuesday 10.22.19 Before Market Open:
Tuesday 10.22.19 After Market Close:
Wednesday 10.23.19 Before Market Open:
Wednesday 10.23.19 After Market Close:
Thursday 10.24.19 Before Market Open:
Thursday 10.24.19 After Market Close:
Friday 10.25.19 Before Market Open:
Friday 10.25.19 After Market Close:
([CLICK HERE FOR FRIDAY'S AFTER-MARKET EARNINGS TIME & ESTIMATES!]())
NONE.
Amazon.com, Inc. -
Amazon.com, Inc. (AMZN) is confirmed to report earnings at approximately 4:00 PM ET on Thursday, October 24, 2019. The consensus earnings estimate is $4.46 per share on revenue of $68.57 billion and the Earnings Whisper ® number is $4.65 per share. Investor sentiment going into the company's earnings release has 71% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 22.43% with revenue increasing by 21.20%. Short interest has increased by 9.6% since the company's last earnings release while the stock has drifted lower by 9.5% from its open following the earnings release to be 1.6% below its 200 day moving average of $1,785.60. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, October 11, 2019 there was some notable buying of 3,280 contracts of the $1,800.00 call expiring on Friday, November 15, 2019. Option traders are pricing in a 4.3% move on earnings and the stock has averaged a 3.6% move in recent quarters.
Microsoft Corp. $137.41
Microsoft Corp. (MSFT) is confirmed to report earnings at approximately 4:05 PM ET on Wednesday, October 23, 2019. The consensus earnings estimate is $1.25 per share on revenue of $32.19 billion and the Earnings Whisper ® number is $1.30 per share. Investor sentiment going into the company's earnings release has 81% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 9.65% with revenue increasing by 10.68%. Short interest has increased by 10.5% since the company's last earnings release while the stock has drifted lower by 2.0% from its open following the earnings release to be 8.7% above its 200 day moving average of $126.38. Overall earnings estimates have been revised higher since the company's last earnings release. On Friday, October 18, 2019 there was some notable buying of 11,630 contracts of the $140.00 call expiring on Friday, October 25, 2019. Option traders are pricing in a 4.1% move on earnings and the stock has averaged a 2.4% move in recent quarters.
Tesla, Inc. $256.95
Tesla, Inc. (TSLA) is confirmed to report earnings at approximately 4:50 PM ET on Wednesday, October 23, 2019. The consensus estimate is for a loss of $0.41 per share on revenue of $6.61 billion and the Earnings Whisper ® number is ($0.25) per share. Investor sentiment going into the company's earnings release has 24% expecting an earnings beat The company's guidance was for earnings of at least $0.01 per share. Consensus estimates are for earnings to decline year-over-year by 112.31% with revenue decreasing by 3.14%. Short interest has decreased by 12.9% since the company's last earnings release while the stock has drifted higher by 9.6% from its open following the earnings release to be 1.3% above its 200 day moving average of $253.60. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, October 18, 2019 there was some notable buying of 40,797 contracts of the $50.00 put expiring on Friday, November 15, 2019. Option traders are pricing in a 8.5% move on earnings and the stock has averaged a 8.2% move in recent quarters.
Snap Inc. $13.52
Snap Inc. (SNAP) is confirmed to report earnings at approximately 4:10 PM ET on Tuesday, October 22, 2019. The consensus estimate is for a loss of $0.05 per share on revenue of $436.73 million and the Earnings Whisper ® number is ($0.03) per share. Investor sentiment going into the company's earnings release has 66% expecting an earnings beat The company's guidance was for revenue of $410.00 million to $435.00 million. Consensus estimates are for year-over-year earnings growth of 77.27% with revenue increasing by 46.70%. Short interest has increased by 40.5% since the company's last earnings release while the stock has drifted lower by 16.6% from its open following the earnings release to be 2.2% above its 200 day moving average of $13.23. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, October 3, 2019 there was some notable buying of 17,904 contracts of the $15.00 call expiring on Friday, November 15, 2019. Option traders are pricing in a 15.9% move on earnings and the stock has averaged a 14.3% move in recent quarters.
McDonalds Corp. $208.50
McDonalds Corp. (MCD) is confirmed to report earnings at approximately 8:00 AM ET on Tuesday, October 22, 2019. The consensus earnings estimate is $2.20 per share on revenue of $5.49 billion and the Earnings Whisper ® number is $2.24 per share. Investor sentiment going into the company's earnings release has 71% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 4.76% with revenue increasing by 2.25%. Short interest has increased by 0.5% since the company's last earnings release while the stock has drifted lower by 4.3% from its open following the earnings release to be 5.2% above its 200 day moving average of $198.28. Overall earnings estimates have been revised higher since the company's last earnings release. On Wednesday, October 2, 2019 there was some notable buying of 8,228 contracts of the $190.00 put expiring on Friday, January 17, 2020. Option traders are pricing in a 3.1% move on earnings and the stock has averaged a 2.5% move in recent quarters.
Boeing Co. $344.00
Boeing Co. (BA) is confirmed to report earnings at approximately 7:30 AM ET on Wednesday, October 23, 2019. The consensus earnings estimate is $2.04 per share on revenue of $19.96 billion. Investor sentiment going into the company's earnings release has 16% expecting an earnings beat. Consensus estimates are for earnings to decline year-over-year by 43.96% with revenue decreasing by 20.62%. Short interest has increased by 3.4% since the company's last earnings release while the stock has drifted lower by 7.1% from its open following the earnings release to be 6.5% below its 200 day moving average of $367.86. Overall earnings estimates have been revised lower since the company's last earnings release. On Friday, October 18, 2019 there was some notable buying of 6,195 contracts of the $310.00 put expiring on Friday, November 15, 2019. Option traders are pricing in a 5.7% move on earnings and the stock has averaged a 2.7% move in recent quarters.
HEXO Corp. $2.74
HEXO Corp. (HEXO) is confirmed to report earnings before the market opens on Thursday, October 24, 2019. The consensus estimate is for a loss of $0.05 per share on revenue of $19.30 million. Investor sentiment going into the company's earnings release has 60% expecting an earnings beat. Short interest has increased by 124.8% since the company's last earnings release while the stock has drifted lower by 55.7% from its open following the earnings release. Overall earnings estimates have been revised lower since the company's last earnings release. On Thursday, October 10, 2019 there was some notable buying of 4,144 contracts of the $4.00 call expiring on Friday, February 21, 2020. Option traders are pricing in a 20.1% move on earnings and the stock has averaged a 5.5% move in recent quarters.
Twitter, Inc. $38.99
Twitter, Inc. (TWTR) is confirmed to report earnings at approximately 7:00 AM ET on Thursday, October 24, 2019. The consensus earnings estimate is $0.20 per share on revenue of $876.26 million and the Earnings Whisper ® number is $0.24 per share. Investor sentiment going into the company's earnings release has 72% expecting an earnings beat The company's guidance was for revenue of $815.00 million to $875.00 million. Consensus estimates are for earnings to decline year-over-year by 4.76% with revenue increasing by 15.58%. Short interest has increased by 24.4% since the company's last earnings release while the stock has drifted lower by 2.7% from its open following the earnings release to be 6.1% above its 200 day moving average of $36.75. Overall earnings estimates have been revised higher since the company's last earnings release. On Thursday, October 3, 2019 there was some notable buying of 6,532 contracts of the $39.00 put expiring on Friday, January 17, 2020. Option traders are pricing in a 9.8% move on earnings and the stock has averaged a 12.1% move in recent quarters.
PayPal $101.22
PayPal (PYPL) is confirmed to report earnings at approximately 4:15 PM ET on Wednesday, October 23, 2019. The consensus earnings estimate is $0.66 per share on revenue of $4.34 billion and the Earnings Whisper ® number is $0.74 per share. Investor sentiment going into the company's earnings release has 69% expecting an earnings beat The company's guidance was for earnings of $0.69 to $0.71 per share. Consensus estimates are for year-over-year earnings growth of 15.79% with revenue increasing by 17.84%. Short interest has decreased by 9.6% since the company's last earnings release while the stock has drifted lower by 13.3% from its open following the earnings release to be 3.4% below its 200 day moving average of $104.81. Overall earnings estimates have been unchanged since the company's last earnings release. On Friday, October 18, 2019 there was some notable buying of 2,212 contracts of the $114.00 call expiring on Friday, November 8, 2019. Option traders are pricing in a 5.6% move on earnings and the stock has averaged a 4.4% move in recent quarters.
Procter & Gamble Co. $117.47
Procter & Gamble Co. (PG) is confirmed to report earnings at approximately 6:55 AM ET on Tuesday, October 22, 2019. The consensus earnings estimate is $1.24 per share on revenue of $17.49 billion and the Earnings Whisper ® number is $1.26 per share. Investor sentiment going into the company's earnings release has 70% expecting an earnings beat. Consensus estimates are for year-over-year earnings growth of 10.71% with revenue increasing by 4.79%. The stock has drifted lower by 2.0% from its open following the earnings release to be 8.6% above its 200 day moving average of $108.17. Overall earnings estimates have been revised higher since the company's last earnings release. On Wednesday, October 16, 2019 there was some notable buying of 51,207 contracts of the $100.00 call expiring on Friday, November 15, 2019. Option traders are pricing in a 3.9% move on earnings and the stock has averaged a 4.2% move in recent quarters.
DISCUSS!
What are you all watching for in this upcoming trading week?
I hope you all have a wonderful weekend and a great trading week ahead r/StockMarket.
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