Big Oil reports earnings soon. Profits are expected to surge. Your portfolio is expected to react like a cat in a bathtub.
The headline says guidance matters most. Correct. Nobody cares what the oil companies made. They care what the oil companies promise. Promises from a industry that sells a commodity it does not price.
The charts say be cautious. I agree. I agreed before looking at them. I agree with all charts. Charts are the only coworkers who never ask how my weekend was.
Here is the setup. Exxon Mobil and Chevron report. Shell and BP report. Analysts have spent weeks tweaking spreadsheets to arrive at numbers the companies already know. Then the companies will beat them by two cents, or miss by two cents, and a man on television will call it a story.
Retail traders will buy the surge. They always do. They see the word surge and feel something stir. A feeling. Of what, they cannot say. Probably the last time they bought an energy ETF at the top and held it through a holiday weekend.
Guidance is the real event. Capex. Buybacks. Production targets. Words spoken by executives in a voice usually reserved for hostage videos. One sentence about spending discipline and the stock drops four percent. One sentence about spending flexibility and it drops four percent the other way. Nobody knows. The chart does not know either. It just looks wise.
Why be cautious? Because good news this obvious is already in the price. Buying a surge you read about in a headline is like showing up to a surprise party everyone has been discussing for a month.
Earnings will be big. Oil is big. Your confidence is big. Your account balance is the only thing in this story that is small.
Photo by David Thielen on Unsplash
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