Morning Notes — CQ3 Earnings Season

Two weeks ago, the S&P 500 (SPX) reversed from short-term oversold levels and above predefined support in the 4230-4250 range.  Those dynamics gave us confidence in our bullish Q4 outlook.  At the time, we identified 4470-4490 as range resistance with a move through that level adding conviction to the bullish view.  The SPX is currently beyond 4490, but the close matters most.

At the moment, nearly all SPX sectors are seeing solid gains, but we stay bullishly biased toward value sectors and the potential for further pro-cyclical rotation in the days/weeks ahead. There’s been a lot of performance divergence among industries (subset of sector in the GICS phylum) over the past two weeks with cyclical industries outperforming defensive groups.  The rally in Tech is an interesting development and deserves attention given the recent back-up in bond yields.  Mega-cap Tech has led thus far with the household names scheduled to report earnings next week. Lower bond yields, increased UK case counts (potentially emerging delta sub-variant) and a decent round of results next week would lead to a broader rally within Tech