Financial Commentators Just Want to Be Heard
or should that be Herd?
When I read something like the comment below I wonder is the guy full of it or actually saying something of value. If such a pattern existed traders would be all over it and the pattern would soon disappear.
“This is the breather day, just taking it all in,” says Marc Pado, U.S. market strategist at Cantor Fitzgerald. “… The way earnings seasons typically goes is that you have a period where the markets rally into earnings, you get the coattails from the big releases in the first full week, and then the individual companies if they hit or miss tend to move stocks but not the group. Finally, get to where you sell the news regardless.”
via Stocks Close Mixed; Alcoa Beats | TheStreet.com.
Looking at the S&P 500 I see little evidence in the last earnings period or previous periods to support Pado’s claim. Alcoa generally kicks earnings season off, reporting early in the second week after the quarter close. Their last four dates were 7-Oct, 8-Jul, 7-Apr and 12-Jan.
Notice back on 8th July the market fell into earnings and kept falling despite Aloca beating estimates. This time around the market was indeed rising, but there are many more plausible explanations for that than a simplistic ‘market rally into earnings’. I checked the last couple years of earnings and did not find the correlation between market direction and earnings that Marc Pado described.
Of more interest was the bounce off the 50 day moving average. Also if you cast your eye back to June, buying the golden cross of the 50 day over the 200 day would have been a good move. At the time I said those using that strategy were late to the party and should have bought earlier, though I’m sure they’re happy enough with their 20% gains now. At the very least these major technical indicators should be a strong impetuous to examine your positions and outlook.
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