/ January 26 / Weekly Preview
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Monday:
Durable Goods Orders MoM (3.7% exp.)
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Tuesday:
ADP Employment Change Weekly
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Wednesday:
Fed Interest Rate Decision (no change expected - 3.75%)
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Thursday:
Initial Jobless Claims (205K exp.)
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Friday:
PPI MoM (0.2% exp.)
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Monday:
Nucor Corporation
Ryanair Holdings plc
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Tuesday:
UnitedHealth Group Incorporated
RTX Corporation
Boeing Company (The)
Texas Instruments Incorporated
NextEra Energy, Inc.
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Wednesday:
Microsoft Corporation
Meta Platforms, Inc.
Tesla, Inc.
ASML Holding N.V.
Lam Research Corporation
International Business Machines Corporation
Amphenol Corporation
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Thursday:
Apple Inc.
Visa Inc.
Mastercard Incorporated
Caterpillar, Inc.
SAP SE
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Friday:
Exxon Mobil Corporation
Chevron Corporation
American Express Company
Earnings Season Core
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Last week provided plenty of drama for equity market investors as geopolitics again took center stage. Despite the fact that there were only 4 sessions to trade, plenty of events transpired both on the economic data front as well as earnings releases, provoking swings of +/- 2%.
With markets closed on Monday due to the Martin Luther King holiday, stocks took a dive on Tuesday, as President Trump’s tariff threats against key European allies provoked a nasty reaction. The S&P 500 was routed to the tune of -2% and briefly closed below 50-DMA support. The Dow and Nasdaq also logged their worst single‑day percentage losses in three months. The slide was not contained to US stocks only, but European equities were also repriced sharply lower.
As is becoming commonplace with President Trump, the narrative shifted quickly, as he delivered a speech in Davos. Among the wealthy elites who decide the fate of the world, Trump talked down the threats and instead emphasized a “framework of cooperation” regarding Greenland. This pivot was enough to spark a relief rally, with the S&P 500 recouping most of the losses. All sectors rebounded initially, Energy (XLE) stood out as a leader for the week, while Utilities (XLU) continued to decline.
Earnings season also ramped up, with several key reports shifting early fundamental sentiment. Signals coming out of these earnings calls were decisively mixed. Investors were not willing to tolerate anything except stellar results and clear forward guidance.
Highlights include:
Netflix (NFLX) gained 13.1 million new subscribers in the quarter, surpassing analyst expectations, but shares fell more than 6% after the company announced a pause in its share buyback program and provided cautious guidance for Q1.
Procter & Gamble (PG) came up short on revenue and showed weak volume growth—particularly in grooming and fabric care categories—while persistent high input costs continued to pressure margins.
Kinder Morgan (KMI) delivered in-line earnings but fell below revenue forecasts, driven by reduced natural gas volumes and a more subdued demand picture ahead. The stock edged lower as investors expressed doubts about the midstream energy sector's growth prospects into 2026.
Johnson & Johnson (JNJ) delivered robust pharmaceutical segment performance and lifted its full-year guidance, which supported the stock in maintaining its positive momentum.
Investors want clean beats, firm guidance, and evidence of margin control in order to bid up stocks from this level.
GDP came in at +4.4% (above +4.3% estimates), driven by an large drawdown in personal savings (shown below), as well as net exports as a function of the ongoing tariff situation.
In the end, geopolitics provided a technical re-test of support, while the other catalysts kept volatility elevated. There remains plenty of inflation and policy uncertainty still, as various datapoints paint an uneven picture of the economy.
After a politically fueled de-risking event on Tuesday, the VIX spiked above 20.0, but eventually retraced to a complacent looking 17 handle. Short term hedges were dramatically reduced, as shown in the study below (yellow downside histogram). While volatility is expected to remain elevated in the medium term, traders are not hedging for meaningful downside this week at least.
Market Breadth took a bit of a hit, but remains healthy overall (when studying the top 1000 companies in the market by volume). A rotation is evident among major factors, with small and mid caps (IWM & MDY) dominating the start of the year with YTD returns of +6.44% and +4.04% respectively. In contrast, Mega Caps (MGK) put in a lackluster 2026 performance so far, down -0.82%.
In other words, it’s no surprise to see healthy levels of participation in the study below. The fundamental thesis for this resurgence is a “reflation” narrative that should benefit most “economically sensitive” companies. For this rotation to be constructive, it needs to be sustained and not just a temporary phenomenon.
Technically speaking, SPY successfully tested 50-DMA support following the strong mid-week rebound. Primary resistance stands at the psychologically relevant $700 level, with the next Fibonacci extension at $720 (R1).
To the downside, we have the 20-DMA just below the last close, with a stronger support base at $681 (M-Trend & 50-DMA). Bulls will be looking for a breakout to new all time highs, on above average volume. A decisive break below $681 would shift the narrative toward a more problematic correction risk, given the elevated overall level at which SPY is trading within its channel.
To say it differently, SPY would be fairly priced if it were trading at $690 in late April (3 months from now of flat consolidation).
As January wraps up, it’s too early to tell if the month will be positive, with both stocks and bonds still susceptible to a meaningful pullback. While sentiment and headlines were what primarily drove markets up to this point, investors will now turn to hard data in order to assess whether valuations can hold up.
We remind our readers of the overall backdrop in which we’re investing - one where the market is pricing in healthy growth levels, low inflation and high corporate margins. The current median EV / Sales multiple assigned to S&P 500 companies is historically elevated, very near the upper business cycle threshold. While recent quarters have delivered strong earnings surprises, much of that upside came from aggressive cost-cutting and financial engineering rather than organic revenue growth.
We’re emphasizing this graph because there’s limited potential for valuations to be the driver for price appreciation in the future. Companies now need to prove why they’re worth such loft multiples.
Hopes are pinned on Wall Street growth assumptions, which are now higher than any of the last several years. If earnings begin to disappoint in the next few quarters, stocks priced for perfection will get punished — a trend we’ve already seen in the performance of stocks that fail to “wow”.
For now, the dominant belief is that inflation is falling, the economy is growing, and central banks will continue to cut rates and be supportive of risk taking. However, this is not by far a given.
From an overall asset allocation perspective, we are no longer trading in the bull market that defined Q2-Q3 of last year. This has been clearly recognized in the holdings of the Enterprise strategy, as well as buying regime we have recently developed (not currently active).
In recognition of the slowing momentum, our models are opting for diversification, holding more cash than usual and preparing for more consolidation rather than a sustained uptrend.
Our Trading Strategy (Sigma Portfolio)
Nothing in the part above says “Sell Everything and go to Cash”. We are certainly not doing that in the Sigma Portfolio and we are aware of higher than normal risk.
This week will be pivotal for our performance, as many names we hold across strategies and client portfolios will report earnings. Most notable for us are Lam Research Corporation, Amphenol Corporation on Wednesday, as well as Caterpillar, Inc. on Thursday.
Broadly speaking, several key S&P 500 names are set to report, including tech giants Microsoft, Meta, Apple and Tesla. From a fundamental perspective, it’s make or break time! Beats or misses will not only define near-term sentiment, but will play a crucial role in technicals as well as seasonal factors that will define 2026.
Disclosures / Disclaimers: This is not a solicitation to buy, sell, or otherwise transact any stock or its derivatives. Nor should it be construed as an endorsement of any particular investment or opinion of the stock’s current or future price. To be clear, I do not encourage or recommend for anyone to follow my lead on this or any other stocks, since I may enter, exit, or reverse a position at any time without notice, regardless of the facts or perceived implications of this blog post. I currently do not own or plan to own any position, long or short, in the securities mentioned.
I am not a financial advisor licensed in the United States. Nor am I providing any recommendations, price targets, or opinions about valuation regarding the companies discussed herein. Any disclosures regarding my holdings are true as of the time this article is written, but subject to change without notice. I frequently trade my positions, often on an intraday basis. Thus, it is possible that I might be buying and/or selling the securities mentioned herein and/or its derivative at any time, regardless of (and possibly contrary to) the content of this blog post.
I undertake no responsibility to update my disclosures and they may therefore be inaccurate thereafter. Likewise, any opinions are as of the date of publication, and are subject to change without notice and may not be updated. I believe that the sources of information I use are accurate but there can be no assurance that they are. All investments carry the risk of loss and the securities mentioned herein may entail a high level of risk. Investors considering an investment should perform their own research and consult with a qualified investment professional.
I wrote this blog post myself, and it expresses my own opinions. I do not have a business relationship with any company whose stock is mentioned in this blog post. The information in this blog post is for informational purposes only and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
The primary purpose of this blog post is to share industry expertise and research and receive feedback (confirmation / refutation) regarding my investment theses.