Tomorrow’s Big News Will Be In This ETF

April 12, 2018

Mish's Daily

By Geoff Bysshe

blankToday’s analysis is by Geoff Bysshe. Mish will return Monday April 23rd.

Tomorrow, before the open, earnings season has the opportunity to ignite bullish sentiment in stock…

Or torch it.

Three influential companies that account for 25% of the Financial Sector ETF (XLF) will report earnings.

The companies are, JPM, WFC and C.

Needless to say, the market is likely to take the results from these three companies and use them as a proxy for what we should expect from the rest of the financial companies in the market.

For this reason, the XLF will serve as a very good measure of market sentiment for the market tomorrow.

And since the components of the XLF account for 14% of the S&P 500. This sector really can move the market.

In fact, the XLK (Technology) is the only Sector SPDR ETF with a higher % weighting or influence in the S&P 500. More on that in a future post.

So how should you use this opportunity to have one day potentially tell us so much about the market, based on one simple ETF?

  1. Carefully – There is a chance that it will not move at all. The opportunity is that if it does have a big move, then you’ll know it could be an important indicator throughout earnings season.
  2. Patiently – Don’t assume the open will provide “the answer”. Where it closes the day is more important. In fact, how it follows through beyond Friday’s range will ultimately be what you want use as your market indicator going forward.

Basically, this is an opportunity for the market to tell us what it’s feeling about earnings.

Keep in mind the absolute earnings don’t really matter.

What’s important how the market reacts to anything it learns that it didn’t already know. For example, reports that vary widely from expectations, and surprises from ‘guidance’ offered in the conference calls.

S&P 500 (SPY) Stopped at the whole number, 267, and couldn’t close over prior highs at 266.75. Key support at 263.

Russell 2000 (IWM) Nice, but choppy move higher. Well above key level of154.30. Initial support area 153.50-154.

Dow (DIA) Levels to focus on are 235 and 246 then 50-DMA at 246.84.

Nasdaq (QQQ) Broke and closed over key level of 162. The 50-DMA is 154. Initial support at 161 then 160. Then 153 is the big low level.

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