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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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The latest earnings season has just begun. So far, it is passing with flying colors. Most financials rallied in the two weeks preceding their earnings reflecting rising interest rates and expectations. This time around, we did not see the usual “buy the rumor, sell the news” event. In fact, most financials continued higher post their reports. Add to that the high-volume breakouts in aluminum producer Alcoa and transportation company J.B. Hunt, and it seems the market is forming a new narrative – earnings growth is catching up with high valuations and some stocks might actually be not as expensive as previously thought. 

In the meantime, crypto is on fire and becoming more mainstream with every passing week. Bitcoin passed 60k in anticipation of the launch of its first ETF. Ethereum is approaching a potential breakout near 4k. No one really knows how to value them and therefore they can be worth anything – this is a good quality to have when there’s plenty of liquidity and risk appetite going around and a terrible weakness when everyone suddenly decides to run for the exits. As a result, most crypto-related stocks are rising to the occasion – MARA, RIOT, COIN, HUT, BTBT, BLOK, MSTR.

In other words, market breadth is improving as more and more industries are starting to break out. Most tech stocks report earnings in the next 3 weeks or so. If they don’t disappoint, I won’t be surprised if we see new all-time highs in the indexes.

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Here’s a Google spreadsheet tracking all closed options and stock ideas shared on my private Twitter stream and emails for subscribers.

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Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.

The charts in this video are powered by MarketSmith

Interest rates continue to rise which is putting downside pressure on most momentum stocks. There are always exclusions like AFRM which staged a major short squeeze last week. The norm for most momentum names lately has been downside to choppy. Inflation expectations are rising- not so much because of pent-up demand and rising wages or skyrocketing money supply but mostly because of supply chain disruptions and shortages which might take many months to resolve. As long as this remains the case, most high-multiples stocks are in danger  –  think tech and biotech.

In the meantime, financials and oil stocks are owning the 52-week highs list. Less than 18 months ago WTI Crude oil went into negative territory because there was too much of it in storage. Right now,  it is pushing $80 per barrel and the energy space is having a massive comeback – not just oil & gas but also coal and uranium.

The so-called recovery stocks (travel, leisure, entertainment) had a brief moment under the sun in late September. They gave back most of their gains in the past week.

Chinese stocks finally woke up. I don’t know if this is just another dead-cat bounce. What I know is that sentiment towards them has never been so negative. Low expectations plus a good technical setup typically equal potential for significant profits. Speaking strictly from a short-term swing point of view. Long-term, they are still in a downtrend. Personally, I would not hold them overnight. 

Try my subscription service which includes a private Twitter feed with option and stock ideas, emails with concise market commentary and actionable swing, intraday, and position trade ideas, the Momentum 40 list of market leaders, and much more. See some of the recent testimonials.

PERFORMANCE

Here’s a Google spreadsheet tracking all closed options and stock ideas shared on my private Twitter stream and emails for subscribers.

Check out my free weekly email to get an idea of the content I share with members.

Disclaimer: Everything I share is for educational and informational purposes only and it should not be considered financial advice.