Two Things to Remember as We Get Deeper Into Earnings

[Chris Johnson Penny Hawk Header](     Wednesday, July 19, 2023 Hello – There's two things to remember as we get deeper Into earnings The largest catalyst for the current market rally is the Wall of Worry, period. Last month I suggested that this market LOVES a crisis, and it’s true. Bank failures, inflation, earnings, recessions, wars, politics. That’s just the short list. Despite all of that, nothing has been able to slow the market. So, the banks have us off to a good start so far. By my count, over 80% of the results have come in at or better than expectations. That’s the kind of kickoff to the season that gets investors and traders revved-up and in the buying mood. In some cases, it triggers that familiar “fear of missing out” feeling and causes traders to go “all in”. Here are a few things that I’d like you to remember. Number One: We’re less than a week into the earnings season. The banks have started things off on a strong note, but we’re literally only four days into an earnings season that stretches out for two months. But there’s a catch. It’s true that historically we see a strong reaction to the first three weeks of the earnings season for a simple reason, familiarity. Those companies that are the first out of the gate are always the big banks. Names that the market is familiar with. Think of it as a “comforting” effect. If the banks come to the market with anything but bad news, the market rallies. That effect is magnified now due to what happened last quarter. It was just a scant four months ago that the market watched as the banking system faced a critical test. Silicon Valley Bank and Signature Bank failed ahead of the earnings season. First Republic Bank then followed suit in May. Those failures cast a cloud of despair over the banks as a group. More importantly, they dramatically lowered the market’s expectations for the banks. Talk about a Wall of Worry. Those lowered expectations mean that the majority of the banks and financial stock only have to show that they’re going to survive, not thrive in the current environment. It makes for a very forgiving backdrop. Unfortunately, it’s limited to the banks for now as expectations are much higher in other areas of the market. Namely, large cap technology companies. Number Two: Seasonality is in full effect, the entire earnings season. The market and individual stocks still abide their seasonal trends through earnings season. Let’s look at Amazon (AMZN) for example. On average, AMZN shares trade 4.9% higher for the month of July over the last 20 years. Add to that that the fact that the stock has a win/loss rate of 75% for July and you’ve got a seasonal winning trend that’s stood the test of time. Looking forward to August, the win/loss percentage for Amazon drops to 53%, basically a coin toss. My point? These seasonal trends are heavily driven by the behavior of traders around earnings announcements. Make sure that you’re checking the trend of each stock you own or are thinking of buying. I know I have one close friend that’ll be checking the trend and following the prevailing winds of earnings season. you may know him, he’s widely known as Americas #1 pattern trader - Or Tom Gentile for short. [He’s going live tomorrow, July 20 at 3:30 p.m](. to show you exactly how he’s trading earnings (Including AMZN reporting in one week). In fact, he'll tell you how to trade ANY stock in the run up to earnings - and he'll give you the 5 stocks he's watching over the next two weeks that have delivered profits 100% of the time over the last 4 quarters.[Click here to join Tom live tomorrow](. 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