Momentum Monday – Strong Earnings Season So Far

MarketSmith powers the charts in this video.

Last week brought strong earnings from so many different industries – ASML (semiconductor machines), IBM (Cloud, AI), NOW (software), NFLX (entertainment), ALV (auto parts), AXP and COF (credit cards), VZ (telecom), LVS (casinos), PG (household products), VLO (refining), etc.

We also saw stronger-than-expected GDP growth. Granted mostly due to higher deficit spending and debt level but inflation is also coming down as expected. The economy might be just as strong as the stock market right now. If this is the conclusion the market makes this earnings season, we might see a rotation into small caps.

Small caps were in a game of whack-a-mole last week. IWM gapped up four days in a row and it faded immediately afterwards. A break above 198.50-199 would start a new leg higher. A break below 193 would start a new leg lower. 

The bulk of earnings season is still ahead of us. Most of the big tech reports in the next three weeks. Some of the big ones next week are MSFT, AMZN, GOOGL, META, AMD, etc. Many of them have already made a significant move in the past few weeks to a few months. A positive earnings surprise might be already baked in. This means a gap-up might be used as a reason to take some profits in some of the more popular names.

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