Equity Market Outlook: Earnings Season Is At Hand

April 20, 2020

Contents ▾

The Bounce Is Happening
The Technical Outlook Is Bullish But …

The Rebound Is On

Concluding hebdomad marked the beginning of the 1st quarter earnings flavour. The Banks were in the spotlight, many of them missing expectations by large margins, but in that respect were mitigating factors. The Banks, for the most part, have been raising the cap reserves in preparation for the microorganism-fallout and that cut into net income. Piece bad at the headline level, the Sir Joseph Banks didn't earn as little as it looks and they're much better prepared for credit losings than at any other clip in history. Good news show for everybody.

This week marks the wild leek to high season. This week we'Re looking reports from dozens of S&P companies while the following two weeks mark trueness "peak season". The bad news is that earnings are expiration to be excruciatingly pretty this quarter. The good news, and there is more beatific news show than bad at this time, is the market has already priced in most if not all of the Q1 declines and is already looking forward and even beyond the next quarter. The outlook for 2020 is negative, about -5% EPS growth for the yr, but the outlook for next year is so much better they don't even compare. The full phase of the moon year 2021 should see EPS growth in the double-digit rank, more than enough to offset 2020 and advance the market from 2019 levels.

The Technical Outlook Is Optimistic But …

The technical mentality honourable now is optimistic. The broad market reach bottom late last month and has been trending higher ever since. The Monday sue this week is negative but ice that up to the energy sector. Oil prices are hitting new lows arsenic I write this post and that is dragging on the broad market EPS consensus lookout for this year and next. Taking that out of the fancy, the SPX is trending higher and looks like it can continue to move high this week.

The indicators are telling. Stochastic shows a bullish market and one that could trend sideways if not boundary higher. MACD is bullish showing upward momentum persists and at strengths to rival the micro-organism-downdraft. My prediction is the market will move sideways in a consolidation move this week. Formerly the earnings reports begin coming dead and the market gets a quantity of relief the rebound can continue. That said, there are some risks including worsened than expected results operating room even up worsened, a rapidly deteriorating outlook for the 2nd quarter. What traders need to watch is the 30-day oncoming average. The price litigate is in their hands flop now, if that group maintains support the odds of an SPX rally to 3,000 or higher is very good.