Earnings Season and the US Dollar

When is earnings season?        

Earnings season is the period of time during which a large number of publicly traded companies release their quarterly earning reports. In general, each earnings season begins one or two weeks after the last month of each quarter (December, March, June and September). In other words, look for the majority of public companies to release their earnings in early to mid January, April, July and October. It is important to note that not all companies report during earnings season because the exact date of an earnings release depends on when the given company's quarter ends. As such, it is not uncommon to find companies reporting earnings between earnings seasons.
The unofficial kickoff to earnings season is the release of earnings by Alcoa (NYSE: AA), which is a major aluminum producer and Dow Jones Industrial Average component, as it is one of the first major companies to release earnings after the end of each quarter. It also coincides with an increasing number of earnings reports being released. There is no official end to the earnings season, but it is considered to be over when most major companies have released their quarterly earnings reports, which generally occurs about six weeks after the start of the season.

You can often see a lot of movement in the shares of companies releasing reports as the market reacts to the new data. It is not unheard of to see shares jump 20% or more or to see them fall by this same amount.

The strength of the US Dollar

 



A strong US dollar coupled with low oil prices will probably bring about a set of disappointing 1Q 2015 results as companies dependent on foreign sales make their goods and services more expensive. Purchasing power is diminished and hence I believe we are in for a volatile April - May 2015 period. The VIX has been rather stagnant recently and I am watching if there will be a spike due to volatility next week.

For those who are unfamiliar with the VIX, it moves inversely with the indices. There is no direct vehicle that buys into the VIX however there are some ETFs and ETNs that try to track the VIX. Note that ETFS and ETNs tracking the VIX has a contango issue and hence I would not recommend buying it for the long term. It is more of a trading tool to catch any volatility in the markets.

Interestingly the Fear and Greed Index is showing how investors are complacent now. Anyway just remind yourself to be cautious and tread carefully into the earnings week. Keep out of the market if you do not feel confident as the markets can be unforgiving and brutal.
Like what Warren Buffett said: You don't have to swing at everything — you can wait for your pitch.

Patience is a virtue that not everyone has or appreciate.