Ep 180: Earnings Season, TPP, FED, Tariffs + Charts

April 19th, 2018

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This week, what we're going to do is:

  • Take a look at the earnings season
  • Take a look at some news tidbits on what's going on in the marketplace
  • Take a look at the charts of some of the popular companies

If you want to take a look at some more in-depth charts, visit https://tradersfly.com/.

Let's take a look at some of the market news headlines

We're coming into the earnings seasons, and we're going through the earnings. Netflix and other companies are due to release earnings. This is what investors are watching and paying attention to.

When you start looking at what's coming up tomorrow, you have a few different major companies, like General Electric, Honeywell, Procter & Gamble, Slumber Shea, Black & Decker, TransUnion, Steve Madden and so forth. You have a couple of these major companies coming out on Friday.

You've already had all these companies that released earnings like American Express, Morgan Stanley, IBM, Goldman Sachs, CSX, and Netflix. That's kind of what's happening.

As you can see, with some of these companies, when you take a look at them companies like Netflix, you can see earnings can pop a company much higher, or it can even make a drop.

Also, CSX, take a look with earnings, how broad or how much this popped pretty significant really when you look at it. It can rattle some stocks and shake them and make them move much higher, or it can also get them to drop much lower.

Here's Goldman Sachs but Goldman Sachs has just been isolating here for quite a while. It is that near the peak, just like it wasn't 2008.

With that in mind, you want to be a little more cautious as you trade throughout earning. If you're more of a swing trader or let's say you break down a portfolio, an investor may have a significant amount, and this could be in long-term holdings, you're not worried about earnings. This you'll still hold through earnings.

But then what you might do is you might have 20% - this could be in speculative trades or something like swing trades. And when you do that now, you have your money split up into different categories. So, you have some in long terms, some in speculative or more swing trading, and for some people, the speculative part is not even in here it might be swing trading, or it could be options.

Everybody has different levels. Then the rest could be even more speculative - this could be like penny stocks.

This could be just a basic portfolio breakdown for you.

What I'm getting at is that when you're looking through earnings, you might have 50% in long-term holdings - those you'll hold through earnings. The option trades or the swing trades, you probably won't hold through earnings. And things like penny stocks or let's say maybe if you're doing options as your main speculative play.

My point being is that when you're looking at your trades, understand what you're trading for that investment. If it's a long-term hold, you probably will hold it through earnings. If it's more active, you probably will not.

For me, most of the time, I am not holding earnings because I have a more significant chunk more in swing and options positions and a lot less so here in long-term holdings.

With that in mind, be a little more cautious as you trade through earnings. If you are in a swing trade, maybe reduce your position size by half or 80%. And then if you feel like you're a little more confident with the earnings, then you could hold a little bit of chunk through. That's just my insight on trading earnings.

As you take a look here today, the stock market is losing a little bit of ground, and they talk about why and due to earnings. But the reality is when we look at the market here today and we start looking at the movement, we've kind of ran up pretty good over the last couple of weeks. We did have a three-day pullback, but now we're pulling back a little bit. And I think it's okay because now we're back into this regular upward trending line.

If we break below this, I think that's fine because now you can get a little bit healthier angle of elevation. If it's a little too steep, you know it's a rocket ship, you'll probably get a pullback. But here, when you're coming back because what ended up happening was, we have this regular line or level that created. Then we had a secondary line that was starting to become established, and that didn't hold more than two to three day. That's why we're pulling back to this other more normal angle because the other one is a little too steep.

Sometimes, these things get oversold, and maybe you'll pull back, and it'll reevaluate itself. It'll recalibrate itself, and then you'll get another little bit slower pace growth line there, but that's okay. There's nothing wrong with that because that means digestion is taking place.

For the time being, I'd watch this kind of line right there if you're looking at the shorter term. If you're looking for a little bit longer, I mean your key line in the sand is still this 2600 level.

The other thing that I'm watching is are we getting a third kind of lower high. That starts to become a problem if you are beginning to create lower highs because now, usually the markets heading in this direction creating higher highs and higher lows.

But if you start moving in the other direction, where now you're starting to create lower highs and lower lows, you're moving in the downward fashion. This is one thing to watch.

We're hitting that third peak right now because you can see right there, there's one, there's two and well here would be the third, if we can't get above that.

The Federal Reserve released its beige book they talk about the tariffs concern

Of course, the tariffs are a concern. I mean now you have manufacturers and farmers stockpiling different things and different resources. It's kind of like you know when you play games where you're trying to store and hoard certain types of material. This is what's happening because nobody knows what's going to happen with tariffs.

When you start looking at these kinds of things, it could be a problem for the economy. It's usually not like this week or this month or maybe even not in the next three months, but often, this starts to come in and creep in six months, a year later. It could be two years later where it becomes a problem. Maybe, by the time, Trump is even gone.

That's when the problems start to happen because it takes time for all those problems to evolve. If you don't change the oil in your car, you could be fine for a couple of years, and eventually, they'll cream up, and then your engine might smell. But it could still run maybe another year or two depending on how you drive.

Eventually, you're going to have some problems, but for a while, it'll continue running.

Another thing is when you look at the TPP, this goes along with the tariffs problem. When you have the TPP, and you have countries that are building strength together, and we're trying to be separate or isolated from other nations, it makes it tough to negotiate.

Whether that's tariffs, whether that's making more money from the goods and products that you sell, it becomes a little bit more of a problem because remember the whole point of that TPP was not to have one country too big.

Usually, you have all these different countries all over the place. The problem is their trade becomes expensive when one country wants to trade. If you have one big country, it can easily dominate all the other countries.

That's why when you look at what we had in Europe, it became its little area into the eurozone. Then you have maybe a couple of the other regions. So if you have five or seven regions, think of it almost like continents. It's a lot easier to trade because a few countries in this group create a win-win situation. Such as, if you're not good at manufacturing cars, we could give you produce because we're good at doing produce but you send us your vehicles, and we do it kind of at a discount without all the taxes, without all the problems. That creates a win-win relationship.

Maybe you're not food growers, you're car manufacturers, but we're food growers, and we create that win-win. That's kind of what the point is.

But if you're kind of isolated, maybe you're big enough, or you think you're big enough, but it still creates a problem with the trade dynamic.

It could create a little bit of tension there depending on how things work out with all the deal makings potentially going on, but nothing's happening yet.

You need to be a little more cautious in the marketplace, and that's why you'll see some sell-offs. Probably sooner rather than always later because in the past, as you recall, things will go up and up and up and up and up and now all of a sudden, boom, you get these. You had these down moves.

Typically, when you get an update, you'll get kind of a pullback. Whereas, in the past, you get an update. An up day that sells off on an update and then a reversal.

You get this, a movement in the up direction, just due to inflation but you get a little bit less euphoria all the time.

The movements are more significant just because we have more volatility and people trade emotionally, but there's more weakness that comes into each bar.

That is what ends up happening.

A lot of these stocks that are breaking out are not doing it in massive strength because there's a little more worry now in the market. The people are more concerned in the marketplace. You have to be a little more cautious in that case because these sell-offs can come very quickly, just like in today's market, you could see we were last couple days three days up, and now we take both of those days. Maybe even the third day out by tomorrow, who knows, so it's acting a little weaker. Be a bit more cautious - take your profits a little earlier, watch your stops and don't be scared to take a day or two off to wait till the dust settles, if things and conditions are not lining up for you.

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Author: Jorge Diaz

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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