...this is what market crashes are made of ...earnings season...

...this is what market crashes are made of

...earnings season coming up soon.

'The Euphoriameter ticked up to another new record high in September. Very simply the consensus is bullish and the stock market is highly vulnerable to any type of disappointment or adverse shocks/surprises.'

https://x.com/jessefelder/status/1842958197562429643

1. Tech Trying: Tech continues to try to regain its status as the leader of the US stockmarket, but remains stuck around that key overhead resistance point. Market breadth likewise remains stuck around the 60% mark. If we ignore macro and valuations and just focus on trend, you might argue that it will eventually resolve to the upside. But there are a few things going on…


Source: Callum Thomas using MarketCharts.com Charting Tools
2. Financial Conditions Uneasing: As a follow-up to last week, this chart is looking less bullish now. The previous easing of financial conditions has unwound somewhat with the US dollar, bond yields, and oil price rebounding. It raises several specters; geopolitical risk (oil), resurgence risk (dollar, rates), and overall macro headwinds into a seasonally sketchy time of the year.


Source: @Callum_Thomas using StockCharts.com
3. Earnings Season: Meanwhile, earnings season is set to kick-off next week, with Friday’s financials (JPM, WFC, BLK,BK) potentially setting the tone for what to expect with the Q3 reports. If the Fed is right in its assessment that the economy is losing momentum, we might see some disappointments. But we likely won’t get the full picture until later in October.


Source: @WallStHorizon
4. October Surprise? Meanwhile, as noted seasonality is generally bad during October in election years. We are heading into the peak period of uncertainty, and no doubt many twists an turns into the final stretch of the election campaign (not to mention the various macro/geopolitical risks lurking in the background).


Source: @callieabost
5. No Contest: But from an optimistic standpoint, after the election we tend to see a clearing of risk, and then focus will shift to the typical year-end rally.
(But what if it’s contested? —and let’s face it, odds are it will be. So it may be too soon to say whether uncertainty will actually fade entirely post election day!)


Source: Twitter post 15 Nov 2020
6. Rate Cut Heights: Back onto rate cuts, this thought-provoking chart shows a sampling of where valuations were tracking at the time of the first Fed rate cut during previous rate cycles. Bears will say it’s 2000 all over again. Bulls will say it’s 1998. I will say, let’s look at the next chart to get a bit more context.