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This Earnings Season Is Unpredictable, Use The Charts

Earnings season is underway. So far, the reactions to the corporate earnings that have been released have been very mixed. Last week, the so-called MAGA (MSFT, AMZN, GOOG, AAPL) stocks reported earnings and shook the markets late last week. This reaction comes as these stocks already ran up into their earnings announcement. After all, since the virus scare started the economy has really slowed to a snails pace. In other words, nobody should expect great earnings from any companies this earnings season.

The positive for the markets right now is that many stocks are holding up pretty well. Traders and investors must realize that the major stock indexes (SPY, DIA, QQQ, IWM) all rallied sharply higher since the recent March low. What is important now is to see the pattern that forms over the next few weeks on the charts. There are many different chart formations that can form and develop. It will be important to identify what these charts are saying to us. Remember, nothing in the markets go straight up or down in a straight line. There is always some backing and filling that takes place, regardless if it is to the upside or to the downside. This is what I call the patience stage of the market. It takes patience to sit and wait for another pattern or setup to unfold.

At this time, the SPDR S&P 500 Index ETF (SPY) has stalled out on April 29, 2020. This high in the SPY comes as the SPY traded into a major retrace level. In all fairness, after a major run to the upside this stall out is natural and possibly very healthy. Now traders will need to keep an eye on the SPY chart pattern going forward. There is still a very good chance that this could likely turn into another buying opportunity very soon. Only the charts will tell.

 

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