Mark Calendars As Third Quarter Earnings Get Dicey

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Simpler Trading Team

Oct 18th 2022  .  3 min read

Estimate-beating third quarter earnings reports delivered a welcome boost to the stock market at the start of Tuesday trading.

Wall Street opened to a raft of positive earnings reports, including Goldman Sachs Group, Inc. (GS), Bank of America (BAC), Johnson & Johnson (JNJ), and United Airlines (UAL).

Traders jumped on the surge as buying buoyed the three major indexes and continued the Monday rally higher.

And then the market faltered.

Mark trading calendars for dicey third quarter earnings

After spiking across the board, the stock market lost more than half its early gains by midday.

Positive response to earnings reports and a boost in U.S. manufacturing output were weakened by additional reports of lowered guidance in retail company Conn’s, Inc. (CONN) and Microsoft, Inc. (MSFT) planning a 1% workforce reduction.

The stock market regained some strength heading into the afternoon with all three indexes showing gains of near 1% or better.

Traders should expect more fast-swinging days like this with the opening hour – bad or good – where momentum may not hold through the session close.

“Keep in mind one bad earnings report could guide the market much lower,” said Chandler Horton, Director of Day Trading Strategies at Simpler Trading. “Let’s see how the market reacts.”

Still to come today is Netflix, Inc. (NFLX) reporting earnings after the close.

Traders would be wise to mark these hot third quarter earnings reports on the calendar: Wednesday – ASML Holding NV (ASML – semiconductors); Tesla, Inc. (TSLA); and Lam Research Corp. (LRCX); and Friday after the bell –Snap, Inc. (SNAP – Snapchat app).

How big is this kickoff week in earnings season? More than 150 companies are expected to report.

“Be open-minded this week as the market is making large rallies and reversals,” Chandler said.

Chandler is focused on internal market signals and staying on top of ever-changing stock chart analysis of the S&P 500. He is eyeing targets in the zone below structure at $3,639 and the overall structure from recent highs around the daily 21-day exponential moving average at $3,722.

Moves in this direction can get dicey for traders.

“Once we approach this structure, I’ll be looking for a potential rollover,” Chandler said.
Two key levels to the downside, according to Chandler, are the previous low of the year at $3,571 and the new low of the year at $3,502 (set last week after the U.S. Consumer Price Index report). If the E-mini S&P 500 (ES) breaks $3,502, Chandler’s major downside target is the pre-pandemic high at $3,397.

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