Here are some things to look forward to in the earnings season

This week’s rally was a positive sign for market. It shows that buyers are still looking for great deals and that investors don’t seem to be too worried about another major decline.

It’s also a positive sign that the bounce took place at a critical support level of the S&P 500, which is close to 3,590. Solid support indicates that there are enough buyers to prevent prices from plummeting.

We have been saying this for some time: Third-quarter earnings should be higher than expected. As long as consumers continue to spend, the floor should not fall below stock prices. This is how earnings season has been so far.

We need to be realistic about our expectations, even though things are looking positive so far. It is very rare for a bullish rally to start with large reversals such as last Thursday.

Investors are often uncertain which means uncertainty is generally discounted into market prices. Inflation, rising interest rate, and slowing global economic growth are all negatives that can still impact the economy.

We believe that the positives and the negatives are well balanced at the moment to keep the market steady, but also prevent major bullish breakouts.

We’re currently in a grey area.

We do have something to look forward to, however, with earnings season underway

Earnings

Although it is still early in earnings season, the bank reports are quite positive. The banks performed well in comparison to expectations if you add the non-cash losses that banks have set aside to cover loan defaults next years (if unemployment rises) into the equation.

The Bank of America Corp.’s (BAC) report is a great example of what we mean.

The net interest income is at its highest level in 10 years. According to BAC management consumer spending on credit cards rose 13%. This is good news because most of this spending is for travel and leisure and not on essentials as many analysts had feared. The bank also reported the second-lowest rate of loan delinquency.

While inflation is a concern for consumer spending, the BAC report confirms that it has not influenced enough consumers to pose a serious economic risk. This news has one negative: the Fed will keep raising interest rates, selling bonds and increasing its overnight target rate as long as consumers demand is high.

We believe that the chances of a major break below support are very low until we see further declines in consumer spending and corporate margins.

Upcoming Catalysts

Two major factors will determine whether the market stays within its channel (which we expect) or breaks free to the downside over the next three week.

Tech Earnings

This week is a busy week for earnings, as tech companies start to make their way into the market.

These reports will significantly improve or damage investor sentiment ahead of the Microsoft Corp., Apple Inc.(AAPL), Alphabet Inc.. (GOOGL) and Amazon.com Inc. reports next week.

Tech firms will likely sandbag (lower guidance so that next quarter is easier) during earnings calls. Companies will not just point to a weak dollar and declining international demand as the reason for slow growth rates in this quarter. But it will be up to the companies whether they believe those trends will continue to affect investor sentiment.

The Fed

On Nov. 2, the Federal Reserve Open Market Committee will likely raise rates once again.

The probability of a 0.75% increase at 95% is being priced in by the bond market, so traders must have already taken into account that possibility.

We don’t know the thoughts of the Fed Chairman and other Governors on the hike and the pace at which future hikes will be made.

Recent statements by FOMC members suggest that there will be some discussion about whether to increase rates in 2023 at a similar pace as 2022. This was however before the CPI report that exceeded all expectations.

Many traders and analysts worry that Fed members will adopt a more hawkish tone, with less “debate,” which could be bad for stocks. We believe the Fed will be consistent right now, but this is the most important wild card.

Bottom line

We believe that the market’s negatives and its positives are fairly balanced.

Traders like to have clear, concise answers. This can make trading difficult. You are not alone if you are feeling frustrated by the market’s wild swings.

We intend to use strategies that work well in a market channel. This means that we will continue to use strategies that work in a channeling market, such as selling calls at resistance levels and buying back them or writing short puts at the lows. We will notify you if we see any changes in our outlook or strategy as more data comes in from earnings, unemployment (Nov. 2) and the Fed (Nov. 4).

We have a proven strategy that works on any market, with a staggering 95.94% win rate this year.

This kind of win rate can be achieved, and almost anyone can access it to make hundreds or thousands of dollars instantly.

Louie Navellier, our colleague flew to the lowest zip code in America to demonstrate how simple it is.

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