Equity Markets: Early Conclusions from Big Names' Reports

As the earnings season begins to gain momentum, big-name companies such as Apple, Citi, and IBM released their quarterly reports, providing insight into corporate profits for Q4'10. Despite a rapid improvement in profitability in the second half of 2009 and three quarters of 2010, US equities still do not appear overvalued. Analysts expect total earnings in the S&P500 index to reach an all-time high this year, supporting the trend on equities.

Key Takeaways:

• Total earnings in the S&P500 index are expected to be the highest in history this year, driven by a rapid improvement in profitability in the second half of 2009 and three quarters of 2010.
• A short-term market dynamic may not be directly correlated with solid quarterly results, as seen in January 2010, when a strong start to the year was followed by a 9% correction on the Dow.
• The market is more overbought than it was in January 2010, only close to levels seen in April 2010, which saw a significant correction kick in.
• The EURUSD pair approached the resistance zone at 1,3433-1,3490 too quickly and made 1,3453, only to retreat and form a falling star candle formation on H4.
• The resistance zone remains intact, with the first key support on the daily chart at 1,3050.
• Investors await the quarterly results, Chinese inflation data, US regional activity indices, housing data, and the German Ifo index this week.

Statistics:

• 9% correction on the Dow in January 2010
• Market is more overbought than it was in January 2010, only close to levels seen in April 2010 (approximately 15% more overbought)
• Total earnings expected to reach an all-time high in the S&P500 index this year
• EURUSD pair resistance zone at 1,3433-1,3490
• First key support on the daily chart for EURUSD at 1,3050

Sources:

• [XTB](http://reports.aiidatapro.com/XTB/us301701111b.gif)
• [X-Trade Brokers Dom Maklerski S.A.](http://www.xtb.pl)