Financials Kick Off Earnings Season

Here is my most recent article for SFO Magazine:

Friday, October 14, 2011
By J.C. Parets

Earnings season is upon us and as usual, the big banks are one of the first groups to go.

JP Morgan ($JPM) reported their earnings yesterday and despite beating estimates, the stock sold off all day. The disconnect between earnings reports and the market’s reaction to that news is nothing new.

SANDBAGGERS

Historically about 70% of companies in the S&P 500 beat the analyst estimates, but I think at this point we know the game is rigged.

Companies guide and point the analysts towards conservative estimates, making it easier on themselves to beat expectations. Apple is probably the most infamous for doing stuff like this.

On the golf course, we call them sandbaggers. You get beat up for stuff like that where I come from. In the market, you sometimes get praised for it. Amazing.

MARKET'S REACTION MATTERS

But traders have caught on to this little game. As a technician, I tend to care more about the market’s reaction to the news, not the actual results themselves.

You can read the rest of the post at SFO Magazine

Tags: $JPM $C $MS $WFC $BAC $GS $XLF