Third-Quarter Earnings Season Heats Up

Commentary

Wall Street wrapped up another successful week with Friday’s gains extending the bulls winning streak to six-straight. An earnings beat from NFLX fueled the ongoing rally after shares soared 11% to settle at a fresh all-time high north of $763.

The Nasdaq made a run to 18,524 while ending at 18,489 (+0.6%) . Key resistance at 18,500 was cleared but held. Continued closes above this level and the July 11th all-time top at 18,671 would imply ongoing strength to 18,700-18,850. Support is at 18,350-18,200.

The S&P 500 settled at 5,864 (+0.4%) after tagging a high of 5,872. Thursday’s all-time high at 5,878 and lower resistance at 5,875-5,925 were challenged and held. A move above these levels would suggest upside towards 5,900-5,950. Support is at 5,750-5,700.

The Dow traded up to an all-time peak of 43,325 before closing at 43,275 (+0.1%). Current and lower resistance at 43,250-43,500 was cleared and held. A pop above the latter would indicate further momentum to 43,750-44,000. Support is at 43,000-42,750.

Volatility Index

The Volatility S&P 500 Index (VIX) sagged to a low of 17.99 with key support at 18 and the 50-day moving average getting tripped and levels that held. A close below 17.50 would be an ongoing bullish signal for the market. Lowered resistance is at 19.50-20.

Monday’s earnings announcements:

Before the open: Dynex Capital (DX), HBT Financial (HBT), Preferred Bank (PFBC)

After the close: BOK Financial (BOKF), Logitech (LOGI), Nucor (NUE), SAP (SAP), W.R. Berkley (WRB), Zions Bancorporation (ZION)

Economic News

Leading Indicators – 10:00am

Market Thoughts

The Russell lagged on Friday after stalling near the 2,290 area the past three sessions with the 52-week peak at 2,299. Continued closes above these levels and 2,300 gets 2,325-2,350 in the mix with the all-time high at 2,444 from November 2021.

Fresh support is now at 2,260 and represents prior resistance from mid-September and throughout the back second half of July. Backup support is at 2,225 followed by 2,175 and the 50-day moving average which is back in a nice uptrend.

The Dow is maintaining its uptrend channel with the chart showing upside towards 44,000-44,500. A pop above 43,500 this week would be a bullish signal for these targets to come into play.

A close below 42,750 and out of the channel would likely lead to a retest towards 42,500-42,000 with the prior holding since mid-September.

The Nasdaq remains in an uptrend channel with key resistance at 18,500 holding in four of the five sessions from last week. While this level is super important, we would wait for confirmation on a move above 18,600 to start fresh bullish positions in Tech.

The middle of the uptrend channel off the August 5th lows for the Nasdaq is at 19,000 with the top at 19,400. These targets could be hit over the next three weeks or by the first week of November. However, a drop below 18,200 and out of the channel would be a slightly bearish development.

The S&P tagged a lifetime peak of 5,878 last week and is trading in the upper half of its current uptrend channel. The index remains on track to test 6,000 over the near-term.

Key support is at 5,700 and also represents the triple-top breakout from September 19th. A fade below this level would take the S&P out of its uptrend channel with wiggle room down to 5,650 and the 50-day moving average.

We talked about the Volatility Index (VIX) needing to get multiple closes below 20 this month to smooth out any possible spookiness for the market. The bulls got four closes below this level last week with the 50-day MA holding on a dime.

We predicted 17.50 could come into play as the earnings season heated up to confirm an ongoing bullish month. So far, so good. If breached and held, our near-term price targets for the major indexes will likely come into play with the VIX testing 15-13.50.

An warning flag for the market will be when the VIX closes back above 20 with panic selling possible if 24 is tripped.

This week will feature a number of high profile companies announcing numbers with the heart of the 3Q lineup from Tech coming next week. Earnings from Apple (AAPL), Intel (INTC), and Amazon (AMZN) come after the close on Halloween.

We cover companies reporting earnings on Monday and Thursday’s but we wanted to highlight Boeing’s (BA) numbers ahead of Wednesday’s open.

The company is expected to report a loss of over $10 a share on revenue north of $18 billion. Shares traded to a 52-week low of $146.02 last Monday and could either be bottoming, or on the verge of testing $130-$120.

We like trading credit spreads on Boeing so we will wait until after the dust settles to see if there is an upcoming trade we can plan for.