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Earnings season is like war. Every war has its heroes and casualties. Just three months ago, Snapchat’s earnings inspired a rally in all stocks that derive their income from advertising. Last week, we saw the opposite. The new iOS privacy features are impacting social media companies and they will need some time to adjust to the new reality.
Other than the hiccup in ad-based businesses and the occasional fake breakout, the price action in the indexes has been mostly constructive. SPY is almost at all-time highs. The small-caps ETF – IWM, is making higher lows and setting up for a potential breakout. Inflation-sensitive sectors like Oil & gas, financials, metals continue to lead. Most software names are also holding remarkably well which is not typical for a rising interest rate environment – OKTA, TEAM, ZS, DDOG, U, SNOW, BILL, MDB, NOW, etc.
There’s a lot of speculative money that is not leaving the market. It’s just rotating. Just look at what happened with DWAC, PHUN, HX, SOLANA last week.
A big earnings week is ahead – all the FAANG stock report, plus Visa, Mastercard, Exxon, Shopify, Walmart, AMD, and more than 600 other stocks. There will be thousands of reports during the next 3-4 weeks. And while the meat of earnings season is typically a choppy period for the indexes as they digest all information, it is also a time of big opportunities. Many new leaders and losers will appear on the scene. Our job is to recognize them and hop on some new trends.
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