Earnings season is starting up. What you need to know as things get kicking...
The last week saw markets start up earnings season again. While Dorsey Wright ranking systems aren’t specifically dialed in to the intricacies of all fundamentals in play during a company’s earnings, we certainly appreciate subsequent price reactions that can result from big reports. After all, “strong” stocks do typically tend to perform better around their earnings reports, as detailed in last quarter’s earnings study linked here.
As usual, the big banks got things kicking early in the week, seeing the likes of JP Morgan Chase JPM, Wells (WFC), Citi C, Morgan Stanley MS, Bank of America BAC & Goldman Sachs GS report. Among other items, markets were (as usual) particularly interested in how each bank held up across their respective net interest income and trading revenues over the last quarter. Results were largely mixed across the board… but there were no particular standouts to the up or downside. With slightly negative over the last week, the only of the previously mentioned names to outperform (and land in the green) was Citigroup, which picked up over 7% this week on strong top and bottom-line results. Many banks (JPM, WFC, MS) retreated after their earnings, maintaining their technically strong posture but pulling back out of heavily overbought territory back into columns of O’s. Citigroup remains largely extended around current levels.
Broader financials remain a standout despite pullbacks for some of the larger names. Representative XLF maintains its positive trend and 5.33 fund score, having steadily climbed since reversing up from $45 in May. Holding RS buy signals against both the market and peers, the weight of the evidence is strong and improving for the sector, and the recent pullback for underlying constituents leaves the fund in actionable territory around current levels. Some of you will be interested in small/regional banks, represented by fund KRE. While the fund reversed into a positive trend and maintains a near-4 fund score, KRE still lags XLF in terms of sector leadership and consistency (as have broader small caps) and lacks long-term relative staying power against major benchmarks. Regardless, its near-term uptick and break back into a positive trend are points to watch.
Looking forward, the next week brings earnings from several big names. TSLA and GOOGL (GOOG) ring in the start of the magnificent seven, followed by IBM later on in the week. Google presents quite an interesting technical picture after lagging significantly to open the year, and while still in the red for the year, trades well off 2025 lows. The name holds a 3 for 5 technical attribute score, breaking into a positive trend in May. GOOGL remains on RS buy signals vs. both the market and peers, with a strong sector matrix rank of 9 of 41 as near term appreciation has been swift. Momentum remains firm on a short-term basis and the stock lacks resistance until all time highs from early 2025 between $200 & $204. Initial support lies at $174, with further support around $164.
