Todd Harrison: The Financials Lead the Earnings Avalanche
Observations from the front lines.
Good morning and welcome back to the first fifth of our freaky week!
Today's tape, with an early N's-over-S's flavor (Nasdaq (INDEXNASDAQ:.IXIC) outperformance of the S&P 500 (INDEXSP:.INX)) -- is more about posturing ahead of earnings than making big macro bets. The fundamental metric will take center stage this week, led by the financials. With taper talk dominating the airwaves, it will be nice to hear some hard results from corporate America as we piece together our increasingly complex financial puzzle.
JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC) report tomorrow morning, Bank of America (NYSE:BAC) reports Wednesday morning, Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS) report Thursday morning, American Express (NYSE:AXP) and Capital One (NYSE:COF) report Thursday night, and Morgan Stanley (NYSE:MS) reports Friday morning. While these reports are, by definition, rear-view, this complex typically trades on forward expectations. Through that lens, the reaction to the news will be more important than the news itself.
While I had some personal matters to tend to on Friday, my Twitter (NYSE:TWTR) bid was hit in our kids' long-term accounts. As I told our broker, this is a starter position-a placeholder of sorts-and while the stock is expensive through most every lens, we've been wanting to put some away in each of their names since before it went public. I missed it at $40; we paid up to $56. Whether that's emotional or prudent remains to be seen, but as I said, it's right-sized given my view of the world.
There is another stock that I've been trying to lasso; this one is in the cannabis space. I don't disclose individual names because many of them are thin and dangerous, but this one seems to be legitimate. Unfortunately, after owning it last year, I sold it right before the 400% rally. I'm not gonna chase it, but it's on my laundry list when it pulls back as I continue to think cannabis is biotech circa 1990 and there are Amgens (NASDAQ:AMGN) in our midst.
Yes, a 400% move in anything is typically a late-cycle (panic) move, and that isn't lost on me.
Some Random Thoughts as we shift our focus from football to financial markets:
- S&P 1795-1800 remains the tangible support for the broader tape, while the 200-day is down at S&P 1689. We haven't touched the 200-day since November 2012, or 287 sessions. That's a long time, but the longest stretch, per Jason Goepfert at Sentimentrader.com, was 640 days in 1946.
- S&P 1850 is the level of lore to the upside. If the bulls can push the tape through there, they'll claim a fresh breakout following the early 2014 pause that refreshes.
I finally saw The Wolf of Wall Street this weekend and we walked out near the end. Too long and too much, in my view.
- Is today's tape the calm before the storm? Yep, feels that way; with the VXO (INDEXCBOE:VXO) at 11 and change (it's just a proxy, I know), there are strategies emerging (stock replacements, married puts) for those who do their homework. See both sides as we continue to find our way.
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Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at email@example.com.
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