Friday, July 12, 2013

JPM JP Morgan Chase Weekly and Daily Charts Earnings Imminent

JPM is the favorite son of the banking industry.  The banking analysts and pundits worship at CEO Jamie Dimon's altar. Note how during the recent up in yields how JPM runs higher. This is traders chasing into JPM believing in the steepening yield curve that benefits the financial sector. Keystone's 2-10 Spread Indicator (you can study this indicator by typing '2-10 spread' into the search box at the right) uses a 255 basis point spread between the 2-year Treasury note yield and the 10-year Treasury note yield as the all-clear signal for banks. With a 2-year yield at 0.40%-ish and the 10-year at 2.53%-ish, this is a 213 point spread remaining 42 points shy of Keystone's all-clear signal, therefore, those traders running into JPM and other banks on the long side, based on the beneficial steepening yield curve, are likely too early.

The weekly chart shows a rising wedge pattern (bearish) and negative divergence in play across all the indicators pointing towards weakness ahead as the weeks play out. Price collapses out of rising wedged can be quite dramatic.  The daily chart receives a smack down in late May but the momo through the month of May was so overpowering that price had to recover to retest the higher prints.  Price places a higher high yesterday intraday and the blue lines clearly show negative divergence remaining firmly in place over the 5-week time frame. The money flow and MACD line on the daily chart wants to see another bounce after a drop so there may be a few days of sideways stutter ahead but overall, like WFC, the projection is lower prices as the weeks play out.

JPM earnings are on tap at 7 AM EST followed by a conference call at 7:30 AM. JPM and WFC will set the market tone today. It is always tricky to forecast the immediate move. The banks in general should report strong earnings this quarter so weaker earnings will send shock waves if that occurs. JPM typically beats by a large margin so that will be expected and a big party follows for a day or two. Any weakness in earnings will start the trek lower for price to test the bottom trend line of the rising wedge  on the weekly chart. JPM is consistent with a stock topping and rolling over to the downside. Independent of the move today, the move for the days and weeks ahead is lower with the low 50's and upper 40's a target as the summer plays out. The 50.2 and 46.5 levels serve as necklines for potential developing H&S patterns. A bounce after earnings would create attractive short opportunities. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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