The balance of the week for equities will largely focus on earnings from several key companies. Sure, they will keep an eye on crude oil prices, and if lower, we could see some sector rotations on the notion there has been some demand destruction (heads up energy sector, this may be as good as it gets for ya over the next several quarters if demand destruction persists).
On Thursday, the Bank of NY, Capital One, Coke, IBM, JPM, MER, MSFT, and UTX report earnings. On Friday, Citigroup, Honeywell, and Schlumberger report. No telling how all this plays out over the next two days, so equity will wish to pay close attention to last weeks close at 1239.75 or 1240 rounded.
I suspect equities are attempting to make sure the low set at 1201 (*a decennial kiss of the July 1998 high at 1200) on Turnaround Tuesday sticks on this key anniversary and decennial week. Still, there is a lot of heat left on this market, and this could pressure equities lower into Friday morning’s earnings reports. Another clue that equities may be pressured into the end of the week is simply that over the past several weeks, one to two day rallies have all exhausted on Wednesday’s.
That alone suggests market participants be very wary of a failure to breach this Wednesday’s highs at 1246. Over the past three weeks since the high of the FOMC meeting on Wednesday June 25, equities set new lows on the week by the end of the next day. The first tell the market may be trying to turn would be a failure to set new move lows on Thursday, and rather finding the 2006 year lows at 1219 as supportive. With so many companies reporting on the final two days of the week, there could be just as many reasons for a short term low setting as the bear trend resuming. So market participants will do well to pay close attention to the earnings reports as well as the tape. Thus far this week, there have only been intraday penetrations of the 2006 yr low. No day yet has been able to trade entirely underneath its two year low. This is another signal the market is trying to turn this week.
