Earnings And The Week Ahead

How do earnings work?

Hello everyone,

For those of you who missed it, I released the Ask Me Anything article (link) and an article with macro charts (link). I really enjoyed answering the questions!

Today, we are discussing earnings. Let's explore a couple of principles and consider how to approach the upcoming week.

• When earnings releases occur, it isn't just about the release; it's about how positioning is set up going into the release. Many times, I hear people confused because earnings come out above expectations, but the stock is down or vice versa. It's because there are no rules in the market dictating how one needs to respond to earnings. It's not the earnings that move the stock; it's the people buying and selling. This is incredibly important!

• Second, when we think about earnings, their impact on the overall index isn't evenly distributed. For example, because Microsoft and Amazon have a larger weighting in the index, their price action can move the overall index more than other stocks. This is why there is usually more focus on FANG earnings than on other earnings.

• Third, when you approach a week like this with a ton of earnings releases, you need a calendar and a plan. I will create a series of tweets and Substack articles for you all, breaking down these things each day, so you can begin to understand how to interpret them. I would much rather you learn how to correctly interpret the market than have a single lucky trade this week.

Here is the calendar of all stocks in the S&P 500 that have earnings releases this week. Be sure to look through the list. I will be sharing a lot about this, so stay tuned.