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Earnings in focus

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The day to day gyration in markets in next couple of weeks will be completely driven by earnings season. Pre announcements will be in focus. When markets are in rally mode coming on to the earning season, lot of positive is priced in unlike last earning season. So expect market to sell off or correct on earnings.

The out of favor sectors are the one to keep an eye on during earning season, as low expectations on them lead to any surprise on upside resulting in rallies. The auto parts sector is one recent example of this. High flying stocks have the highest risk of reversion on earnings.

As I have said earlier, the real money making opportunity during earning season is in neglected, low float stocks with no analyst coverage and very low institutional holdings. Any surprise on these leads to quick 25% plus moves lasting till next earnings.
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2 comments:

Unknown said...

I don't think we'll see a real correction in this market until the current dollar liquidity levels are at risk caused by a hawkish Fed. When big funds see the marketability of their positions threatened, then they will sell. I agree that a lot of money is going to flow out of foreign investments as we have already seen rate hike speculation begin in other countries as well as the US. We could see a flight to liquidity in such a case. Some of that money will be parked in US stocks for the security that the dollar brings. This is the bluff that the Fed has called on the rest of the world and is probably correct, that regardless of how much M3 they pump, nobody can reproduce the dollar's security.

If earnings season brings a dip, it will likely be just another unimportant buying opportunity until Fedspeak scares the bankers.

sJ said...

I think the current earnings season is going to be good. It started off well with AA and the market closed high. Some high flyers will post strong earnings. We will see a correction in the market after the end of earnings season