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Perfect Storm | Long $ARLP

Well folks, this is the week that everything goes down. On deck, we have the first FOMC meeting of the year on Wednesday as well as a slew of big-ticket earnings - as such, the outcome of this week will go a long way in determining the directionality of markets in the short to medium term, so hold on as the S&P tries to stay above 4,000 points! Lastly, we also have a special article for you today on our partner Nextech AR Solutions ($NTAR) - published to Seeking Alpha by our newest writer, Alex Ponte. Check that out here and read on for your daily dose of market inspiration!


Markets in Review

After a 6-day green streak, things may be turning red with the Dow, S&P and Nasdaq losing 56, 86 and 116 bps respectively in the premarket today. Moreover, the S&P has pulled well above its long-term resistance and this week will seal the fate on if this turnaround has legs - at the very least, Wednesday's interest rate hike will need to be by the anticipated 25 bps and these blue chip earnings need to be in line with expectations at the low end. Lastly, the following is a preview of the issuer reporting through the week and a review of this Q4 reporting period’s data.

Earnings Scorecard: For Q4 2022 (with 29% of S&P 500 companies reporting actual results), 69% of S&P 500 companies have reported a positive EPS surprise and 60% of S&P 500 companies have reported a positive revenue surprise. Earnings Growth: For Q4 2022, the blended earnings decline for the S&P 500 is -5.0%. If -5.0% is the actual decline for the quarter, it will mark the first time the index has reported a year-over-year decline in earnings since Q3 2020 (-5.7%). Earnings Revisions: On December 31, the estimated earnings decline for Q4 2022 was -3.2%. Seven sectors are reporting lower earnings today (compared to December 31) due to downward revisions to EPS estimates and negative EPS surprises. Earnings Guidance: For Q1 2023, 17 S&P 500 companies have issued negative EPS guidance and 2 S&P 500 companies have issued positive EPS guidance. Valuation: The forward 12-month P/E ratio for the S&P 500 is 17.8. This P/E ratio is below the 5-year average (18.5) but above the 10-year average (17.2).


Long: Alliance Resource Partners (ARLP-MASDAQ) | Timeline: 1 day

Alliance Resource Partners, L.P. (ARLP), a diversified natural resource company that produces and markets coal primarily to utilities and industrial users in the United States, reported record earnings this morning before the market open. The company successfully reported revenue of $700.7 million and net income of $214.5 million, up 48.0% and 313.8% YoY, respectively - a testament to the company’s ability to execute and deliver reliable energy supply amid a supply and transportation-constrained operating environment. (Full Story)

Turning to the chart, ARLP has had quite the run over the last 12 months, increasing from just over $10. With that, obviously comes retracements along the way, and the stock has experienced just that. Over the last quarter or so, a descending wedge has formed, and the price has just finally broken out in the pre-market. Traders should expect this run to continue through the day, especially as the MACD continues to turn bullish.


Zooming Out...

Chaos in Iran

Over the past 72 hours, multiple Iranian localities have been under attack by various entities. On Saturday, a series of drone strikes on military buildings and manufacturing plants was reportedly launched by Israeli special forces, while another series of explosions rang out across the country late Sunday night. Mossad’s role in Saturday’s attack was confirmed by US senior intelligence officials, while Iranian officials have claimed there was little damage from the attacks. No party has claimed responsibility for Sunday’s actions, however, the US was quick to distance themselves from both events through an official statement.

Increasing Polarity

This weekend, the world was treated to two harsh statements from top Western officials that paint a dreary picture of combat actions in the coming years. The first was from an interview with Rob Bauer, chairman of NATO’s Military Committee, where he disclosed the alliance’s goal of re-armament and it’s capability to engage in a direct confrontation with Russia. Within this interview, he also advocated for NATO nations to transition to wartime economies that can bolster defence production.

The second comes from a memo created by four-star USAF general, head of Air Mobility Command, and former head of the Indo-Pacific Command, Mike Minihan, where he laid out his predictions for a US-China conflict over Taiwan. Minihan believes that the two superpowers will engage in direct conflict in 2025, as the US is distracted by the 2024 presidential elections. He has also urged members of the AMC to get their personal affairs in order, and ensure that they are prepared. After the memo was released, a DOD official stated that those views are not the views of the department.


Making Headlines...

Ackman Says Banks Face Too Much Liability Exposure on Adani Deal

  • Investor Bill Ackman doubled down on his criticism of Adani Group, saying that there’s just too much liability exposure for the banks involved in the Indian company’s equity sale. (Full Story)

Spanish Inflation Unexpectedly Jumps After Months of Easing

  • Spanish inflation unexpectedly quickened in January after a five-month run of slowing price growth, prompting traders to boost their bets on how high the European Central Bank will raise interest rates. (Full Story)

European Gas Prices Swing as Traders Track Demand, Stockpiles

  • European natural gas fluctuated as the return of warmer weather keeps a lid on heating demand, even as cheaper fuel brings the possibility of a rebound in industrial consumption. (Full Story)

Oil Edges Lower as Commodities Ease, Investors Eye Rate Hike

  • Oil edged lower, along with broader commodities markets, as China’s return from Lunar New Year holidays failed to deliver hoped-for gains. (Full Story)


Chart of the Day: Big Tech Buybacks


“There is always some madness in love. But there is also always some reason in madness.”

- Friedrich Nietzsche


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