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“As of January 27, (with 34% of the companies in the S&P 500 reporting actual results for Q4 2016), 65% of S&P 500 companies have beat the mean EPS estimate and 52% of S&P 500 companies have beat the mean sales estimate.” for more – FactSet

S&P500 Components: Below are the Top 10 S&P500 stocks, by weight. Additionally, Apple reports Q4 results after the close this evening, followed by Facebook on Wednesday and Amazon on Thursday. Analysts are reporting differing expectations for Apple, with some expecting a miss, while others look to earnings growth. Facebook and Amazon are expected to beat, if analysts are correct in their assumptions.

SPX Top 10

S&P500 Sector Mix: Below are the sector weightings for the index. Note technology garners a (18.57%) share of S&P500 earnings, so many will be laser focused on these tech giants. The sector mix is balanced further, with Consumer Discretionary at (10.98%), Financials weighing in at (16.23%) and Industrials at (11.04%). All four of these sectors show bullish patterns, as highlighted in the weekend video newsletter.

SPX sector percent

As we’ve noted previously, we typically reduce our exposure during earnings season, so its no surprise that many institutions and professional investors/traders do the same. This change in momentum is apparent in a flat MACD, in addition to volume fading, prior to the pull back on Monday. Monday’s volume was higher by contrast.

We do note that institutional sentiment is still bullish, as TICK cumulative beats a path higher. On balance, our thoughts are singular. As long as price action remains above the 20ema, the index is bullish.

SPY EOD

If for some reason, Apple, Facebook and or Amazon miss earnings we will reassess our positions. For now, the markets and investors are doing exactly as you would expect. Smart money is waiting for the “all clear” signal. That said, unless you are day trading, or taking short term swings, we would advise a respite. There is no need to take on additional risk until the dust settles.

Watchlist: Many of the stocks on the list showed buying interest at Monday lows. We are looking for a follow through or continuation day to trigger any short term swings until the caution flag is lifted. We updated the site last night with a new Traders Tip Video, which outlines what we mean by follow through or continuation day as an entry confirmation.

Happy Trading – CV



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