{"id":97860,"date":"2016-11-07T18:10:31","date_gmt":"2016-11-07T23:10:31","guid":{"rendered":"http:\/\/countingpips.com\/?p=97860"},"modified":"2016-11-07T18:10:31","modified_gmt":"2016-11-07T23:10:31","slug":"heres-why-investors-should-ignore-earnings-season","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/11\/heres-why-investors-should-ignore-earnings-season\/","title":{"rendered":"Here&#8217;s Why Investors Should Ignore Earnings Season"},"content":{"rendered":"<div id=\"inves-2761618157\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">November 7, 2016<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><h3 style=\"margin-top: 0px;\"><span style=\"font-size: small;\">Shattering the myth about earnings and the stock market <\/span><\/h3>\n<h3 style=\"margin-top: 0px;\"><span style=\"font-size: small;\">By Elliott Wave International<\/span><\/h3>\n<p>[Editor&#8217;s Note: The text version of the story is below.]<\/p>\n<div class=\"embed-responsive embed-responsive-16by9\" align=\"center\"><span class=\"LimelightEmbeddedPlayer\"><script src=\"\/\/video.limelight.com\/player\/embed.js\"><\/script><object id=\"limelight_player_168865\" class=\"LimelightEmbeddedPlayerFlash\" data=\"\/\/video.limelight.com\/player\/loader.swf\" type=\"application\/x-shockwave-flash\" name=\"limelight_player_168865\" width=\"480\" height=\"321\"><param name=\"movie\" value=\"\/\/video.limelight.com\/player\/loader.swf\" \/><param name=\"wmode\" value=\"window\" \/><param name=\"allowScriptAccess\" value=\"always\" \/><param name=\"allowFullScreen\" value=\"true\" \/><param name=\"flashVars\" value=\"mediaId=81ddae7cb7d1492393eb94b4c01fcd5b&amp;playerForm=Player\" \/><\/object><script>LimelightPlayerUtil.initEmbed('limelight_player_168865');<\/script><\/span><\/div>\n<p style=\"text-align: center;\">*********<\/p>\n<p>It&#8217;s earnings season, and most investors are paying close attention (Reuters, Oct. 9):<\/p>\n<p style=\"margin-left: 0.5in;\">&#8220;If there&#8217;s something that can help the outlook for earnings, then it&#8217;s going to be good news for the stock market. It is the most important variable,&#8221; said [a] chief investment officer.<\/p>\n<p>The belief that earnings drive stock prices permeates Wall Street. That sentiment was also expressed in an Oct. 21 CNBC article:<\/p>\n<p style=\"margin-left: 0.5in;\">Strategists are watching whether earnings growth will sustain further gains in the market.<\/p><div id=\"inves-2896879966\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p>But do corporate earnings really determine the stock market&#8217;s trend? In a word, the answer is &#8220;no.&#8221; Let&#8217;s look at just one sample of the evidence from the February 2010 <em>Elliott Wave Theorist<\/em>:<\/p>\n<p style=\"text-align: center;\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.elliottwave.com\/Stocks\/-\/media\/DE1EFA42FF434F7BBC57852580FF38FA.ashx?h=646&amp;w=600&amp;hash=DCF2EF9B275B2DADC7AD849FE80901CF9879C31C\" alt=\"\" width=\"500\" height=\"538\" \/><\/p>\n<p style=\"margin-left: 0.5in;\">The chart shows that in 1973-1974, earnings per share for S&amp;P 500 companies soared for six quarters in a row, during which time the S&amp;P suffered its largest decline since 1937-1942. This is not a small departure from the expected relationship; it is a history-making departure. Earnings soared, and stocks had their largest collapse for the entire period from 1938 through 2007, a 70-year span! Moreover, the S&amp;P bottomed in early October 1974, and earnings per share then turned <em>down<\/em> for twelve straight months, just as the S&amp;P turned up!<\/p>\n<p>Many market commentators either ignore or are unaware of the evidence which challenges the bedrock theory that earnings drive stock prices.<\/p>\n<p>Hence, investors feel safe when corporate earnings are good. They are wary when earnings are bad. These sentiments make sense in an exogenous-cause world. But, as the <em>Theorist<\/em> has noted:<\/p>\n<p style=\"margin-left: 0.5in;\">Financial market prices are not set in an exogenous-cause world. You don&#8217;t buy stocks on record earnings; you buy them on <em>bad<\/em> earnings.<\/p>\n<p>The idea of buying stocks on awful earnings might seem radical, but think back to February-March 2009, when S&amp;P companies were reporting losses, not gains. Even though most of the investment world was gripped with fear, a Special Investment Issue of the <em>Theorist<\/em> published on Feb. 23, 2009 and said:<\/p>\n<p style=\"margin-left: 0.5in;\"><strong><em>I recommend covering our short position at today&#8217;s close<\/em><\/strong>. &#8230; Our main job is to keep the money we have. If we exit now, we will do that.<\/p>\n<p>Just 10 trading days later on March 9, 2009, the Dow Industrials bottomed and has since advanced about 177%.<\/p>\n<p>That market call was based on the Wave Principle, not an exogenous factor like corporate earnings. Remember, the Dow Industrials started its years-long advance when corporations were reporting <strong>losses<\/strong>.<\/p>\n<hr \/>\n<table class=\"body\" style=\"border: solid 5px #EAEAEA; padding: 10px;\">\n<tbody>\n<tr>\n<td valign=\"top\"><\/td>\n<td valign=\"top\">\n<h3><a href=\"http:\/\/www.elliottwave.com\/r.asp?acn=9cp&amp;rcn=aa639&amp;dy=aa110716&amp;url=http:\/\/www.elliottwave.com\/Free-Reports\/The-Power-of-the-Wave-Principle\">Unleash the power of the Wave Principle<\/a><\/h3>\n<p>Much like a great sports play; to appreciate a great market forecast, you have to see it. In fact, we&#8217;d like to show you four. Our examples do indeed show what can happen when Elliott analysis meets opportunity. But we&#8217;re not asking you to attend a class in &#8216;good calls.&#8217; In each of these four markets, the unfolding trends have (once again) reached critical junctures. You really, really want to see what we see, right now.<\/p>\n<p><a href=\"http:\/\/www.elliottwave.com\/r.asp?acn=9cp&amp;rcn=aa639&amp;dy=aa110716&amp;url=http:\/\/www.elliottwave.com\/Free-Reports\/The-Power-of-the-Wave-Principle\"><strong>Get your report &#8212; How to Find Real Opportunities in the Markets You Trade &#8212; FREE<\/strong><\/a><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<div>\n<p style=\"padding-top: 10px; border-top: solid 1px #CCCCCC;\"><em>This article was syndicated by Elliott Wave International and was originally published under the headline <a href=\"http:\/\/www.elliottwave.com\/r.asp?acn=9cp&amp;rcn=aa639&amp;dy=aa110716&amp;url=http:\/\/www.elliottwave.com\/Stocks\/Heres-Why-Investors-Should-Ignore-Earnings-Season\"><strong>Here&#8217;s Why Investors Should Ignore Earnings Season<\/strong><\/a>. EWI is the world&#8217;s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.<\/em><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Shattering the myth about earnings and the stock market By Elliott Wave International [Editor&#8217;s Note: The text version of the story is below.] ********* It&#8217;s earnings season, and most investors are paying close attention (Reuters, Oct. 9): &#8220;If there&#8217;s something that can help the outlook for earnings, then it&#8217;s going to be good news for [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-97860","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/97860","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=97860"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/97860\/revisions"}],"predecessor-version":[{"id":97861,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/97860\/revisions\/97861"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=97860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=97860"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=97860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}