To be sure, there are always earnings – but four times a year the confessional is filled with mass quantities that last for a good five weeks. It’s one of my favorite times of year. Why? As an option player there is no better time – big moves, sometimes gargantuan moves. I expect some great trading opportunities to open up this coming earnings season. With the markets nearing breakouts it should be a good time. The recently concluded fourth quarter should provide some nice surprises as the bar has been lowered (making it easier to beat expectations). Last quarter we had some sensational results and posted some plays on the website – I expect to do this again over the coming weeks!
This past week was quite interesting. With low volatility and little in the way to ‘shake the trees’ the setup was there for individual names to stand out from the rest. If you recall a key generator of poor performance in 2011 was the strong correlation between markets and stocks. Once that separation occurs it will open the door for stock picker performance to shine. Friday had all the makings of a disaster. With an imminent downgrade of some European nations by a ratings agency it appeared the markets would be on the ropes. Afterall, what was there to lift markets intoa three-day weekend?
Surely this would topple the bulls confidence and perhaps be the start of a major setback – much like we saw after the US debt downgrade. But alas, this is January, not August. The market was resilient in the face of such bad news, portraying a change in character we have noted recently. Breadth was weak as volume came in rather light, but next week may see the return of higher turnover.
We haven’t looked at the charts in quite awhile, so I want to focus on the SPX 500. It appears the days of big volatility and wild swings are behind us for now. I suppose we will see that pop up when the next disaster occurs, crisis, fear or uprising. As Roseanne Rosannadana (SNL fame) used to say, ‘It’s always something‘. The uptrend has hit some resistance at the October highs, perhaps some good earnings will lift it past here into higher ground. The seasonal trend is not so positive here but will become more so by the end of January.