Earnings season has officially started, and this is a big week for earnings with Tesla, Netflix, Bank of America, Charles Schwab, Johnson & Johnson, Morgan Stanley, Goldman Sachs, ASML, TSMC, American Express, Proctor & Gamble, and many others reporting earnings this week. With very little economic data being released this week, earnings will be the biggest market mover. And while earnings are expected to show another quarterly decline, the stock market is expected to rise.
Last Week Recap
Both the Consumer Price Index (CPI) and Producer Price Index (PPI) came in lower than expected, causing the stock market to notch it’s 4th straight week of gains. But some signs of economic slowdown also showed up in the economic data last week, such a decline in retail spending. Most notably, the Fed meeting minutes from March were released and the big shocker was that the Federal Reserve is now predicting a recession. The Fed forecasts the recession to start by the end of 2023, and for the economy to take 2 years to recover from the recession. The Federal Reserve says bank failures will result in a recession by the end of the year, with Warren Buffett saying he also expects more banks to fail by the end of the year. Despite the market dropping on Wednesday from that news, and again on Friday after retail sales came in low, the market still managed to notch a winning week. Earnings season also kicked off last week. Delta reported a loss due to rising fuel prices, but forecast a profit in Q2. And JP Morgan Chase reported their best quarter in history due to rising interest rates. That caused most of the bank stocks to rise, but regional banks traded fairly flat. Regional banks start reporting earnings this week.
After four straight weeks in a row of bullish gains, the fear and greed index (https://www.cnn.com/markets/fear-and-greed) remains solidly in the greed stage, rising to 67 last week from 58 the week prior. And while the greed indicates the stock market will realize a 5th straight week of gains this week, any surprise in earnings could reverse that greedy sentiment.
The volatility index (VIX) dropped to the lowest level since January of 2022. That puts the VIX solidly in the bullish spectrum, indicating a continuation of the bullishness we’ve seen over the past 4 weeks. But market participants couldn’t help but notice that the last time the VIX was this low, the stock market was at it’s peak, and proceeded to sell off massively from there. So while the VIX is indicating bullishness and a continued rise in the stock market, investors should be cautious of a possible reversal.
After 4 straight weeks of gains, the technicals are almost entirely bullish. On the DOW, S&P, and NASDAQ, the technicals remain 100% bullish. And while the Russell was the outlier last week, even that has turned mostly bullish. The only concerns on the Russel are that the 10 day EMA is still below the 21 day EMA, and the RSI is still slightly below 50. But despite the extreme bullishness the market is showing right now, there are some strong resistance levels that could pause the rally. All four major indexes are at very strong resistance levels. It’ll take exceptional earnings beats to get the stock market to rise above the technical resistance levels. If earnings fail to impress, the rally could take a breather this week.
The weekly charts all remain extremely bullish with the exception of the Russell, which remains 100% bearish. So no changes from last week on the weekly technicals. With regional banks reporting earnings this week, if those earnings are better than expected, they could finally cause the rally the Russell needs to turn bullish again.
There’s no major economic data being released this week, but there are a lot of Fed members speaking. Every day this week a Fed president or governor speaks, with most of those speeches occurring during market hours. Be sure to check the Fed speaker schedule below so that you don’t get surprised by sudden intra-day movements.
Regarding the minor economic data being released this week, we have the home builder confidence index being released on Monday, followed by housing starts and building permits on Tuesday, and existing home sales on Thursday. US leading economic indicators is also being released on Thursday, and services and manufacturing PMI indexes are being released on Friday.
Here’s the full list of all of the economic news coming out this week as well as the time each report is being released: https://www.marketwatch.com/economy-politics/calendar
Here’s what time each Fed member is speaking this week: https://www.federalreserve.gov/newsevents/calendar.htm
Earnings season is in full swing this week with a lot of major companies reporting earnings, including Tesla. The major industries reporting this week are banks, airlines, and pharmaceuticals. Bank earnings so far have been better than expected, but Delta last week reported a loss due to higher fuel prices. So while bank earnings might carry the market higher through Tuesday, earnings later in the week are less certain. Netflix and United both report Tuesday after the close, while Tesla and IBM report Wednesday after the close. To get my predictions on how I expect these companies to report, and how I expect their stocks to perform this week, watch my earnings prediction video here: https://youtu.be/MFN7VtgcfBs.
Other Things to Know
I provided my stock market prediction for the rest of this year based upon the current economic situation, Fed expectations, and market psychology, as well as some historical data. If you want to know what the rest of the year will look like for the stock market, make sure you watch my 2023 stock market prediction video here: https://youtu.be/MFN7VtgcfBs.
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