Earnings Season Makes for Dramatic End of October

Headlines are all over the place as we begin the final week of October, with the Wall Street Journal proclaiming, “U.S. Companies Warn of Slowing Economy,” while Reuters states that “Nasdaq 100 index may see record with Apple earnings due Tuesday.”

So, it’s a slowing economy leading to a potential Nasdaq record, which is a strong reminder that reading the news is not the same as understanding and analyzing the markets themselves.

In the WSJ article, some of the blame for earnings declines is placed on foreign currency effects.  The article says, “Consumer-products maker Kimberly-Clark Corp. predicted that currency swings would slash earnings by 25% this year, while Johnson & Johnson said that the dollar’s moves would reduce sales growth by almost 7 percentage points this year, even without further fluctuations.”  This could lead to profit opportunities for Forex investors, as swings present traders a chance to locate buy and sell points for the future.

Meanwhile, the news about Apple (AAPL) is useful to options traders, as the Reuters story notes, “Options market action shows traders expect Apple shares to move roughly 5.0 percent by the end of next week. The average move for the stock the day after its report in the last eight quarters was 4.4 percent, up or down.”

Continuing the trend of conflicting news stories, CNBC checks in with a report declaring, ”History says a terrible market week is ahead,”  which notes that while more than 150 S&P 500 companies are set to report this week, data going back almost 50 years indicates that the fourth week of October is seasonally the weakest of the entire fourth quarter.

But don’t despair, because CNBC also reports in the article that December is coming up soon, and during that month, the S&P usually rises by an average of 1.5% on average.

Here at MTI, we recommend you always keep track of the news, but watch your Ultimate Charting Software to see how the markets react (or don’t react) to any headlines.  It’s always better to know what the markets do as opposed to what some people think they might do — and it’s more profitable, too!

Make sure you join us for one of our forex and stock and options webinars (you can register for our Equities trading webinar.

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