January 17, 2023, 9:29 pm EST
Earnings and Direction
The direction of a stock is determined by its earnings. We can see this theory clearly from two investment banks: Goldman Sachs Groups (GS) -6% and Morgan Stanley (MS) +6%.
Since there is no way to know the earnings and reactions, it would be better to stay away from guessing the numbers and gambling on the outcome. Each investment capitals are precious so we prefer to wait until after the earnings report and then check out its potential.
Obviously, GS and MS went in totally opposite directions after the report. GS looked very bearish and MS set up a bullish breakout.
Three major indexes got three different biases for 2023:
- Dow Jones: Bullish
- S&P 500: Neutral
- Nasdaq: Bearish
Therefore, the stock market does not give a consistent message at this moment from its divergence.
But, the stock market performed well since the beginning of 2023 so the short-term momentum tends to be bullish. We stay on the sideway to watch if any new leaders or laggards appeared. The leading sectors belong to the core sectors: industrial, financial, and energy.
Let earnings reports show us who are winners and who are losers.