S&P 500
Dow Jones is back at the highs on strong stock market performance. The Q3 earnings season kickstarted, and some notable companies show better than expected results. As such, the wind behind the stock market will continue to blow heading into the U.S. elections.
The earnings season for the third quarter started with two prominent names beating expectations today – J.P. Morgan and Citigroup.
J.P. Morgan reported $2.92 EPS on $2.35 expected, beating the forecast by a mile. Also, its third-quarter revenue grew to $29.95 billion. But what is more important is that the provision for credit losses at the bank was only $0.61 billion. The market expected this number to be much higher, around $2.4 billion, and if this spills over to the entire banking sector, it means that the economic impact of the COVID-19 pandemic is smaller than feared.
Citigroup blew up forecasts too. Trading revenue increased more than expected, and so did adjusted earnings per share, reaching $1.4 on expectations of $0.93.
Dow Jones struggled to make a new all-time while its peers (e.g., S&P500, Nasdaq 100) had no problems doing so. But it does build energy to break higher, constantly forming new higher highs and higher lows.
It seems like there is just a matter of time until the Dow reaches a new all-time high, and a strong earnings season may be just what it needs to do so.
To trade a move higher, bulls may want to wait for the Dow to actually make a new all-time high. Next, the invalidation level comes at the previous higher low in the series. Also, a proper target needs to follow a minimum risk-reward ratio of 1:2, obtained by measuring the distance from the entry to the stop-loss and projecting it twice from the new high.
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