This Earnings Season Changes Everything (GET READY Now!)

Earning season is here and the market  is starting to react. Should you prepare   for some bumps ahead? Joining us today is  Mark Chaken with Chaken Analytics. Mark,   so great to have you back on the show, especially  as earning season is just getting underway. You   have gone through countless earning season and  the many years and decades you've been in the   stock market. I want to just start out by looking  at what's different about this earning season uh   before we even get to the big banks. Well, what's  different about this earning season, Bridget,   is that analysts have actually been raising their  earnings estimates heading into earnings season.   And that's not a good thing for the market because  that's a contrary indicator. So, when analysts are   lowering their estimates coming into earnings  season, which is more typical, the rally tends   to follow. Uh, and that happened in April when we  were up, I think, 9% during earning season. That   was a bit unusual. But I think the thing about  this earning season is expectations are very   high because the economy is so strong. But that's  not necessarily a good thing for uh the market's   reaction to earnings. So uh I think it's going  to be volatile and choppy even though earnings   are going to come in very very strong. Yeah. And  that is exactly what we are already seeing with   the very first earnings reports of the season and  that's the finance big bank stocks. Um some really   strong reports here. Let's get into those and what  you're noticing from the big banks this quarter.   Well, Bridget, well, there's been a lot of group  rotation in the past months since we last recorded   out of uh the chip stocks, out of some of the  MAG 7 stocks, particularly to pay for SpaceX,   and into industrials, finance, and healthcare.  So, the financial ETF XLF made a new high   uh this morning based on these strong earnings  reports from the major banks. The biggest um   reaction on the upside was Goldman Sachs because  they are mostly trading and investment banking and   both those areas have been very very strong. Uh  but JP Morgan, Bank of America, Wells Fargo City,   all reacting positively to very strong earnings.  And uh I'd say the biggest change was Jamie   Diamond who's been bearish uh for about 2 years  or at least downbeat about the economy talking   about a potential typhoon that's going to sweep  over the the economy. Never happened. Uh I'm a   little skeptical now that he is wildly bullish  about the economy. And that's why I think that   this earning season is likely to be a sell the  news event for particularly in the tech sector.   Yeah. Interesting. We're going to dive into the  tech sector mostly in this conversation even   though we're starting with this conversation  on finance. Uh but I want to talk about some   of the the standout numbers from those bank  reports this morning and and that's the the   equities market. The growth in that area was just  tremendous for for many of these banks. uh what   do you think that says about what's happening  in the market and the economy right now? Well,   one thing is that uh because the economy is so  strong, these banks have cut back their loan   loss reserves. So, banks put money aside to uh you  know cushion against potential loan losses. Well,   when they do that, that hurts the bottom line  because it goes right to the bottom line out   of earnings. In this quarter, the banks are  cutting back their loan loss reserves, which   means that's a boost to the bottom line. It's  an immediate uh B12 shot to the bottom line. So,   uh we're seeing a very initially, by the way,  in the pre-market traders were selling the news,   but then when investors saw what the numbers look  like, uh you now have the bank stocks up. And so,   this is a very strong quarter across the board.  consumer banking, uh, investment banking, trading,   particularly in the bond market because the  volatility and in the the general economy. So,   the financial stocks are one area where I would  definitely be buying the dip. I wouldn't chase   the strength here, but uh, the earnings that we're  seeing are a reflection of how strong the economy   is right now. Yeah, there's so much strength  in the economy that you already said you're   expecting a lot of very strong earnings report for  the rest of the season. So, let's get to why you   think there's also going to be volatility. If we  have the strength and numbers that these reports   show the economy is strong, why still expect  the volatility? Well, because we have such high   expectations going in and because analysts uh when  analysts raise their estimates going into earning   season, uh the likelihood is is uh more than 50%  that earning season is going to be a net negative.   And here we are up near the all-time highs in  the S&P. Uh but yet we haven't broken through.   And even with this morning's inflation number,  which was came in much better than expected,   and these big bank numbers, as we're recording  this, the market is now flat to down on in terms   of the S&P 500. So we've we've come a long way and  group rotation has uh sp uh shown a spotlight on   sectors beyond just tech but because tech is so  much in the forefront I think we're going to see   uh sell the news reaction and by the way I think  that's going to be a buying opportunity but you   you this earning season you have to sort of  play uh three-dimensional chess and figure   out what the expectations are whether companies  going to meet or beat expectations and then how   traders and investors are going to react to that.  So this is not a simple earning season and that's   why I expect a lot of volatility and choppy market  action even though earnings are going to come in   strong. Yeah, those three areas are very difficult  to predict and we're going to talk about how some   of those areas could go with this earnings season  and and the first area I want to talk about is   that big tech and obviously that's always one of  the most highly anticipated earnings reports to   come out because that's where we're seeing all the  investment and the growth and the interest right   now. What do you expect for some of those MAG7 big  tech names this this quarter? Well, the Mag 7 is   is uh separate and distinct from the software and  the chip stock. So, I think you know tech is now   uh almost a two party system where you have legacy  tech which is Microsoft, Apple, Amazon, Google and   so forth. And in that space only two of those  stocks have a bullish power gauge rating. And I   I put Oracle into that group as well because these  are the hyperscalers, the people who are spending   hundreds of billions of dollars to build out data  center capacity so that they can sell it down the   road. But in terms of the power gauge, which  is how we look at the fundamental picture and   the technical picture, just Apple and Meta have  bullish power gauge ratings. Tesla bearish rating,   Oracle making new lows, Nvidia doesn't look that  strong right now. So, it's a very selective market   at the mega cap uh end of the spectrum. On the  other hand, chip stocks which have now sold off   almost 20% from their highs 15 to 20% on average  for things like Micron uh AMD and uh SanDisk.   uh those stocks are going to be buyable here.  Uh but again, the earnings reports are key and   just as Dell and Huelet Packard and Micron  just blew out the numbers, the expectations   are really high and it's not clear that they can  um you know beat the bar so to speak. Yeah, the   bar is just incredibly high right now for all of  these AI names. Micron is a really great example.   They just reported earnings about three weeks ago  and looking at what the chart action was is is   wild example of that volatility that can come  after earnings. Uh they had a big spike right   after the report on the 24th. But then starting  the day after earnings, the stock dropped about   25% in just a week and a half or so. So again,  wild volatility and this is one really good   example to show kind of exactly what you said  of expect volatility this earning season. So,   that's a great example, but I'm also curious to  see what the power gauge has to say about Micron   and some of the other names that you mentioned.  Again, if you've watched our channel before,   you have heard of the power gauge. This is Mark's  system for how to look at all of the fundamentals   of stocks and really make a decision about whether  now is a good time to be looking at buying a   stock or not. And I know that's always the big  question investors have. And the Power Gauge is   an incredible tool to do that. We have a special  offer for our viewers today. If you want to try   out the power gauge for yourself and see how it  works for all of the stocks in your portfolio,   plus take advantage of some really interesting  special reports that come with this offer,   you can scan the QR code or click the link in  the description to try out the power gauge for   yourself today. Again, a special offer you'll only  get watching here on Market Beads. Well, Mark,   let's dive into what the power gauge says about  Micron and again Dell, some of the other names   you mentioned that had a pullback after their June  earnings. The power gauge rating is bullish for   Dell, for Micron, for Sandis, for AMD, and they've  all pulled back substantially from their highs in   some cases more than 20%. These stocks in my view  are buyable right now, not based on earnings,   but based on the fact that the power gauge is  bullish, which means the fundamental and technical   picture are still very, very uh attractive, and  they've pulled back to oversold on a short-term   basis. So this is a buying opportunity in some of  these stocks that have been just spectacular and   and already responded to positive earnings. So I  think uh what we're looking at in the hardware and   the chip stocks is a buying opportunity. What  we're looking at in the mag 7 in the main is a   selling opportunity. Yeah. Let's talk a little bit  more about those mag seven stocks. And interesting   that you also include Oracle in that conversation.  And I know you've had uh some interesting things   to say about Oracle in the past on the show and  it's come up just this week because it is on such   a downtrend right now and we have uh one regular  analyst on our show who is very bullish on Oracle   says this is a great buy the dip opportunity.  I'd love to get your thoughts on uh Oracle right   now and some of these other um you know meggaap  hyperscalers on whether you think they'll recover   or if this is a time to be getting out of these  names. Well, Oracle has been my number one bearish   stock for 2026. We had that big rally from uh 140  to 240. Uh and I was highly skeptical of that and   here we are now at a new 52- week low. Oracle has  made a major bet, $300 billion bet on Open AI. So,   they're building capacity to sell to Open AI.  Well, guess what? OpenAI just postponed their   potential IPO from 2026 to 2027. Why? Because  they're losing money and they want a trillion   dollar valuation. Well, they're not going to get  it. And that means that Oracle has made a big bet   on a horse that's starting to fade. And I think  Oracle is not a buy the dip opportunity. I think   it's what we used to call catching a javelin.  It's it's really difficult to do that and stay   uh healthy and I I wouldn't go near Oracle at some  point if they get back to basics and they stick   with their database software business and they own  Slack so which we use all the time. But Oracle has   made a major bet and I think they they bet on the  wrong horse. So interesting that again my favorite   thing about this channel is that we have all kinds  of different perspectives. Sometimes one day after   the next you'll hear one thing and then and then  another thing. I think it's really good for retail   investors to listen to a broad perspectives of  opinions and then figure out where they fall in   line with as well. So thank you for sharing  that Mark. Let's dive a little bit into some   of the other um hyperscalers that you're looking  at right now. I know you mentioned Nvidia doesn't   look that strong and that's not for a while yet.  We know Nvidia really kind of ends earning season.   Um but do you expect earnings to do anything  for Nvidia? We haven't had a good track record   the last few quarters of earnings really boosting  Nvidia's stock price that much. No, Nvidia is the   poster child, Bridget, for sell the news. Uh if  you look back at the last four earnings reports,   even though they were blowout, the market  anticipated them and then s the stock sold off uh   probably 10% in each of those cases between 5 and  10%. Nvidia made its high in May up over 230. So,   it's significantly under its high, but it was as  low as 190. The power gauge still likes Nvidia,   but it's in a downtrend right now, and it has  to break above 210 very quickly in order to   uh reestablish in an uptrend. And it's running  into resistance here. So, as we're recording this,   Nvidia is sort of struggling to get above that  210 level. And if it can't do that, uh, then,   uh, heading into earnings report, it's in a weak  position. But the last four earnings reports have   seen sell the news on Nvidia because the hype  and the buildup and the anticipation came before   the earnings report. Yes, that's exactly what  I've noticed with Nvidia earnings the last few   quarters, really the last year or two. I'm curious  if that is what we could start to see in more and   more of these tech stocks, these really huge  companies. uh and could that trickle down into   the small to midcaps as well? Uh is this a kind of  trend that we're starting to see more of during an   earnings season? Well, small to midcaps, I think,  is where the action's going to be going forward.   We've had a sort of breakout in the S&P uh value  index, uh which measures the stocks in the S&P   500 that are categorized as value stocks. And that  breakout uh has been pretty major, up 15% uh over   a three-month period. And that's very unusual  and usually a good sign for small and midcap   stocks. So um there you have to be selective, but  we that's where the power gauge comes in. We can   look at the midcap universe, which isn't that well  known, uh 400 stocks uh in the S&P midcap index,   and find the jewels there. There are a lot of  them, not just in the tech space, but in the   banking space, energy, and so forth. But how about  if we segue to SpaceX because I think there's a a   real uh lesson to be learned. What's happened to  SpaceX since we recorded about a month ago? Yeah,   there is so much to talk about here. Um,  obviously, we saw the IPO do surprisingly   well for, you know, a week or so. Um, and then the  downtrend has, uh, just continued for SpaceX. Um,   what do you think happened with that IPO and the  kind of price action that we're seeing over the   last couple of weeks? Well, what happened with  SpaceX is they stuck a little bit of a um hand   grenade or ticking time bomb into their perspectus  before they went public, which basically said,   well, we're not going to be Starlink space uh  darling that everybody thought we would. We want   to be AI. Well, uh, people didn't buy it for that.  And unfortunately, the people who bought the stock   in the aftermarket when it spiked up over 200 are  now deep underwater because SpaceX is making a new   low uh here uh yesterday. I think it's going to  be 6 months before uh SpaceX really bottoms out.   The reason for that is there's something called  the lockup period where the insiders cannot sell   the stock until that lockup period expires. That  lockup period is typically 6 months after the   public offering. This happened to uh Facebook when  it went public in 2012 and it's going to happen   here in SpaceX in my view and and for the people  who own it who bought it in the aftermarket,   I think they're going to have to be very patient.  But what happened with SpaceX is they they dealt a   wild card uh in the IPO perspectus which basically  said well we we want to become the AI giant and   I don't think that's what people were expecting  and it's it's sort of come to light as analysts   have started to analyze why the stock is doing so  poorly and I think that's one of the big reasons.   Yeah, this brings me back to small caps though  in space because a lot of the questions we get   from our viewers who were very excited about these  smaller cap space stocks heading into the SpaceX   IPO and those uh stocks all skyrocketed before  the IPO and then after the IPO that whole sector   of small cap space stocks has really taken quite  a hit. What's your take on when those stocks might   turn around and if this earning season could be a  catalyst for any of them? I don't think so because   they don't have the earnings that uh would drive  stock prices. Some of them do, some of them that   are established, but some of these newer uh  space companies are hurting now because the   SpaceX IPO has done so poorly. SpaceX really is  the the alpha dog in this space and the the other   uh the dogs in the space are following their  lead. So I think a lot depends on SpaceX and what   Elon Musk decides SpaceX is going to become. But  right now uh I think there's been a lot of profit   taking in these stocks because except for the old  established um rocket companies uh the earnings   aren't there for the newer companies. So there's  been a lot of public offerings, spaxs and so forth   in this space, no pun intended, but uh I think  highly selective again there's been a lot of hype,   a lot of buildup to the SpaceX IPO. And with  SpaceX trading back down to the IPO price,   I think people have to take a very uh hard look at  the stocks that they're invested in and make sure   they've got solid fundamentals. And one of the  best ways to look at those fundamentals is through   the power gauge. It makes it so easy to see if a  stock is fundamentally strong or not, especially   these space names, but really any stock in the  market. Again, a reminder, if you want to take   advantage of that special offer today to try out  the power gauge system for yourself to see what   it has to say about some of these space stocks  or other stocks you're interested in, just scan   the QR code or click the link in the description  to get that special offer and those additional   free special reports today. All right, Mark,  let's dive a little bit deeper into the small   to midcap market. wanting to give investors more  of a roadmap on how to handle this earning season.   We have all seen those earning seasons where some  small cap name you've not really heard of before   has a really big surprise blowout earnings and you  see the stock just jump quite a bit on that really   great surprise in the earnings report. Um how  do you handle um those kinds of stocks during uh   an earnings season? Are there certain names that  you look to get in before the report is released?   Do you stay away from any uh small cap midcap  stock that spikes on a big earnings news in   that first couple of weeks after? Uh just give us  a little bit of a roadmap for handling that small   to midcap market. Well, again uh because these  stocks are not followed widely by analysts. Uh   they tend to react well and develop some momentum  going forward. So here's the scenario. A stock   that's covered by three analysts reports fabulous  earnings. Yeah. other analysts will now start to   pick up coverage of that stock and recommend it.  So particularly in the regional uh brokerage firms   like Raymond James uh Piper Jaffrey you know the  ones who follow the uh small cap and midcap stocks   in their area are are the leads but now some other  banks investment banks and and brokerage firms are   going to start recommending them. So in the small  and midcap space, you tend to see more followth   through if they have a good earnings report  because they're under f under uh followed by the   analyst community and a good earnings report will  put a spotlight on these companies and attract   more buying interest. So, uh, in the small and  midcap space, I'm not as inclined to sell the news   as I am in the large cap space where everybody  follows the stock and there's potentially no new   buyers to come in even if the earnings report  is great as we discussed with Nvidia. I mean,   that's sort of one of the problems with Nvidia.  There's nobody left to buy it except the index   funds which have to buy it based on the market  cap. But I mean, if you haven't bought Nvidia by   now, you haven't been watching the market for the  last four years. So, uh, not a not a criticism of   people who don't own Nvidia, but the reality is  there's nobody left to buy Nvidia. And you know   the company is great but except for the index  funds who have to buy it periodically when they   get an influx of cash which they have in the last  3 months big huge over $50 billion going into the   index funds since the April bottom there's no new  buyers whereas in the small and midcap space these   are un uh undiscovered unknown gems and when they  report great earnings they tend to continue higher   which is u something that I think investors have  to realize. Just one example of a company in the   midcap space is ABNET Electronic Equipment, $6  billion market cap, 25 billion in sales. Just   pulled back recently with the other tech stocks,  but instead of pulling back 20%, it's only down   10%. Symbol is AVT, bullish power gauge rating. I  would bet that most of our viewers aren't familiar   with Adnet, but yet it's a super company. So  that's an example of a stock which if they report   fabulous earnings, which they did back in April,  is likely to see follow through just as it did   in April. When they reported in April the stock  was trading at 77, it spiked up all the way to 94   over the it didn't spike up, it traded up to 94  over the next uh 2 months. And so that's sort of   more typical of what happens in the midcap space.  Yeah. And what I'm hearing a lot from you right   now is you are not very bullish on these megga cap  hyperscaler stocks really doing well this earning   season. We might see more volatility there. But I  am hearing a lot more optimism and positivity for   the small to midcap market. Uh where we are seeing  some strength right now. And my biggest curiosity   is do you think that that market is going to  continue to be maybe more of the stronger market   as we head into this midterm election cycle? I  want to talk about that a little bit too because   this earning season is butdding right up to that  midterm election. Um where I know that in the   past we've talked and you said that that is your  prediction for kind of a market bottom to hit in   that October November timeline. Well, more like  September October in the leadup to the election.   Yeah, I I think uh initially thought there could  be a 10 to 20% pullback this year at some point,   but all we've seen so far was that April uh bottom  which was 9.9%. And uh but I do think that we're   in a very uh sort of weak seasonal period uh from  mid July through uh midocctober and earning season   right now is at the beginning of that weak  period. So that's why we started the segment   by saying volatile and choppy for the next 4 to 6  weeks, maybe some spillover into September on the   downside, and then a fabulous buying opportunity  heading into 2027. Such a great road map for our   viewers today about how to handle and what to  expect this earning season. Uh, a lot to come.   I can't wait to follow up next month and see how  some of these stocks have done as as big tech   starts to report in in a few weeks here. Mark, as  always, thank you for the great insights for our   viewers and some really great stock suggestions  here, too. If you want to hear more from Mark,   make sure to check out our last interview  together. You can find that whole interview