An Early Bottom or After Earnings Season?

Tiger_comments
2022-07-20

Last night, the US stocks enjoyed a long-awaited rally, with three major index- $S&P 500(.SPX)$ (3,936.69) up 2.76%, $NASDAQ(.IXIC)$ (11,713.15)up 3.11%, $DJIA(.DJI)$ (31,827.05) up 2.43%. $Netflix(NFLX)$ surged 5.61% after its good guidance.

Data from tradingview

Under this background, we may question is it a rebound or a reversal of the bear market. We gonna analyze when the market will reach the bottom.

1. Bottom After Earnings Season?

Recently, many influnencers said that the market may bottom after this earnings season. 

Mainly because:

a. Market--$S&P 500(.SPX)$  already fell too much and has a very low P/E. There is no much room for subsequent plunge.

b. The earnings season may bring very high volatility. If one big company released a disappointing earnings, the broader market will be dragged down. For example, $Apple(AAPL)$ made the whole market down the other day because it reported a "slow-hiring" guidance.

c. It's expected that CPI may top in June, i.e. the inflation can be curbed, because the oil prices fell from its high recently.

To learn more about their opinions, you can click: 

Gene Munster: Market Will Hit Bottom After Earnings Season

In Bear Market, Leader Stocks Tends Bottom Before Indexes

Market Still in Extremely Fear: 10 Indicators to Check Bottom Reverse

2. Bottom Before The End of Earnings Season?

The long-awaited rally seems unreal after bear trend in the past 7 months.

However, based on the above reasons on why the market can reach bottom after earnings season, we can also conclude that:

a.  From the technical analysis, $S&P 500(.SPX)$ may rise above the upper blue circle as it already filled the lower gap.

Data from tradingview

b. Probably there are no more big surprises in this earnings season.

So far, the worrying $Netflix(NFLX)$ also enjoyed a rally although it lost 970,000 subscirbers in the 2Q. 

$Apple(AAPL)$ already reported the slow hiring and its earnings won't cause too much volatility because the market already priced in it. 

$Tesla Motors(TSLA)$ won't surprise the investors as it released data regularly.

c. Rate hike expectations from cmegroup also lowered to 33.2%. (compared to 82% last week)

Data from cmegroup.com

What do you think of the recent rally: A happy rebound or cautious of earnings season?

Do you think the market reach bottom during/after the earnings season/more challenges ahead?

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Comment（3）

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  • highhand
    ·2022-07-20
    Looks like market bottomed BEFORE earnings season!
    From here, it will be cautious till the end. Esp, closer to rate hike on 26-27 Jul
    Further good news from Fed like 75bp will blast us to the moon
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  • TWJ84
    ·2022-07-20
    with so many bad news being anticipated, it's not surprising that there's optimism over any good news. I think the main challenges the whole world is facing are not behind us yet. fingers crossed!
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  • RDPD富爸穷爸
    ·2022-07-20
    Possibly signs of market bottom since bad news are released but market continues to recover. e.g CPI report, earning reports etc are not good but market disregard the poor results. To be certain of
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    • RDPD富爸穷爸: 
      market reversal, moving average need to moves up but it's usually a lagging indicator.
      2022-07-20
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  • ___ _
    ·2022-07-20
    I think it is a happy rebound but only for a short while.  So long the inflation rate is still out of control, Sanction against Russia still going on, market will stay cautious. 
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    • ___ _: 
      Earning Season is just a distraction from the real issues affecting the market.
      2022-07-20
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  • Success88
    ·2022-07-20
    Just a litter happy. I don’t think it will be long. Soon bear will come back again
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  • Kingcat
    ·2022-07-20
    it's a bounce. the effects of interest rates hikes are still not fully reflected in the earnings this season. we have to wait to see next quarter's earnings to judge if this is truly the bottom ':)
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  • Joker_Smile
    ·2022-07-20
    in times of bad markets, any positive news are overly rated. thus i think its a short rebound as things have dropped too far. there's still many unresolve issues, so I'll be cautious of it.
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  • Brocco
    ·2022-07-20
    Definitely hope for happy rebound. However just a few days ago. Singapore news comment that recession might rollover to next year. So mainaining cautious for now. Can still continue to DCA though
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  • MHh
    ·2022-07-20
    Wont be too quick to rejoice. Have not seen the full effects of all the rate hikes but maybe the market have priced that all in already. I remain cautious for now
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  • SPOT_ON
    ·2022-07-20
    i think it better to get out from us stocks on dead cat bounce before large interest rate hike next week

    @Tiger_chat

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  • Cris0
    ·2022-07-20
    Remains cautious. Waiting for more evidence and good news. Inflation rates still high. War and covid still ongoing. Uncertainty still remains. Likey need a few months more to bottom out
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  • grizzlylee
    ·2022-07-20
    slowly climb up but maybe bear again [Doubt]
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  • Boo2020
    ·2022-07-20
    maybe there will be double or triple bottom before the rally comes back
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  • 己所不欲
    ·2022-07-20
    Most likely the market is excited by the coming Earning Reportings .  but I highly doubt it will kick off a bull run.   it should swing sideways for quite a period of time before any catalyst kick in
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  • SG 88
    ·2022-07-20
    Earning season usually gives investors the chance to bargain hunting for those that have fundamentally strong companies. Rock bottom stock price does not means in 2 to 3 years time it will persist. 😊
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  • Big Cat
    ·2022-07-20
    Tech sector rebounded quite fiercely. Only 2 choices: either hold or sell (if u expected bad results).

    I think the market has not reach bottom. But, we still need take a look at those coming reports

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    • Big Cat: 
      . Still required more data to confirmed if it's bottom because the current situation does not seem to match the given data [Thinking].
      2022-07-20
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  • Kaixiang
    ·2022-07-20
    This may be a relief rally after a long bearish run. Overall macro conditions are still not favourable, and most guidance are typically lowered. Effects of rate hikes might be delayed, stay cautious
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    • HelenJanetReplying toKaixiang: 
      Thanks for sharing 👍😊
      2022-07-21
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    • Kaixiang: 
      @DiAngel @RDPD富爸穷爸 @pete13 @HelenJanet @SPOT_ON @Bonta @Boo2020 @koolgal @Big Cat @Bellabing @EKT @SR050321 @VivianChua @Wayneqq @wywy @WYCKOFFPRO @Jaydenkho @Furore @AliceSam @TinyTiger
      2022-07-20
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    • ___ _Replying toKaixiang: 
      👍👍
      2022-07-21
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  • JL28168
    ·2022-07-20
    just a short time of rebound from after a big drop...this may not continue soar as long as inflation n economy is not fully control n recover...company earning surely impact n bad news will out..
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  • Keeley
    ·2022-07-21
    [1/2]this should be a dead cat bounce. we should see more companies with dry earnings. performing better than management guidance doesnt mean that the companies are fundamentally doing well.
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  • Keeley
    ·2022-07-21
    [2/2]don't forget, fed is going to force the market down by removing money from the system. im still bearish, a risk that im willing to take.
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