Earnings Projections, Support, and Resistance

Earnings season kicks off in full force today with Alcoa Inc. (AA), the biggest U.S. aluminum producer, scheduled to announce first-quarter earnings after the market close today. Alcoa is the first member of the Dow Jones Industrial Average to report.

While it may not feel that way on Main Street and in the housing sector, earnings at public companies are healthy. According to Bloomberg:

  • Corporate profits probably rose to a record last quarter.
  • Earnings for Standard & Poor’s 500 Index companies probably gained 12 percent in the three months ended March 31, from a year earlier, according to analysts’ estimates.
  • Profits of Stoxx Europe 600 Index companies likely increased 21 percent.

We mentioned back on March 21 that materials, energy, and industrials were well positioned. Not surprisingly, they are projected to report strong earnings growth (see below). We continue to have a tentative bullish outlook. We still like mid-caps.

The markets have been treading water waiting for earnings – stocks have stalled near a logical point (see below).

Stocks have also held at a logical point near the thin blue line below (monthly chart).

Buyers have been less enthusiastic in recent sessions and momentum has slowed considerably in the short-term. If we pull back, the next areas of basic support are shown below.

A little more noisy view of the S&P 500 shows three key areas to watch on the downside. We would tend to exercise some patience as long as the levels shown below hold.

About Chris Ciovacco 73 Articles

Affiliation: Ciovacco Capital Management

Chris began his investment career with Morgan Stanley in Atlanta in 1994. With a focus on global macro investing, Chris uses both fundamental and technical analysis to assist in managing risk while looking for growth opportunities around the world in all asset classes.

Chris graduated from Georgia Tech with Highest Honors earning a degree in Industrial and Systems Engineering in 1990.

He is now the Chief Investment Officer at Ciovacco Capital Management.

Visit: Ciovacco Capital Management

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