The forecast this week for equities, and bonds for that matter, is partly to mostly sunny with occasional earnings misses and “talked-down” forward guidance casting the only clouds on the landscape.
The Fed advertising their intent to backstop markets by cutting rates is by now old news.
It’s almost a stated guarantee that we’ll see a quarter point cut out of the July 30-31 meeting minutes.
Then there’s the prospect of a September cut. Fed Funds futures are pointing to that as more than likely.
Not a bad background from which to paint a rosy picture.
Watch for the Ebbs and Flows in Upcoming Earnings Season
Volume picked up last week as stocks rose to new highs. Sidelined money coming in on Fear Of Missing Out (FOMO) trading saw volume increase on the NYSE by a rather sizable 42% over the previous week.
Bullishness over the Fed’s de facto promises saw sentiment rise in terms of stocks trading around an intermediate-term moving average crossover (MAC) point, where the 50% line is the bullish/bearish lever.
Last week 68% of 1800 stocks were above their MAC point. The week before 66.3% were above their MAC. Three weeks ago, only 50.3% were north of the MAC dividing line. That’s money coming in folks.
Besides the Fed making the sun shine, investors globally were net selling and moving into cash and U.S. assets.
The S&P Europe BMI fell .85%, with Italy being the only meaningful riser, up .75%, and Germany being a big loser, down 1.97% on the week.
Asia fell more with the S&P Pan Asia BMI down .96%. China was the second biggest loser, down 1.68%. India took the biggest loser title, down 1.96% on the week.
It’s no wonder the sun’s shining on U.S. assets, be they stocks or bonds; everyone else is slipping, and once again, the U.S. is the “cleanest dirty shirt in the laundry.”
The only clouds on the horizon for U.S. equity markets is earnings. They’re coming.
Some 50 S&P companies report this week, 122 next week, and another 121 the week after.
We’ll see how good or bad they are. But the way companies talk down their earnings to then magically beat consensus estimates, virtually ensures there will be more beats than misses. But we’ll see.
For more on how to best position yourself for massive profits during earnings, my friend D.R. Barton regularly highlights the biggest trends of earnings reports each and every quarter, plus look inside the incredible loophole to a big pool of government cash.
In the meantime, go with the flow, especially when capital’s flowing into U.S. assets.