This week starts the first-quarter earnings season and Alcoa kicked things off Monday night by beating analysts' estimates.
One thing that jumped out at me regarding the sentiment toward the overall market ahead of the earnings season was the Commitment of Traders report for the mini S&P futures.
Large speculators finished the week net long more than 150,000 contracts, the first time since the beginning of July 2013 that the group has been long that many contracts.
I should point out that the aforementioned time period would have been the beginning of earnings season, just like it is now.
Looking at the summer of 2013, the market had just gone through a slight selloff before the COT hit the high bullish reading. After the reading, the S&P 500 moved higher for several weeks and then went through a four-week selloff that started at the end of July.
Volatility has increased in recent months and with that, it looks as if the high expectations for earnings reports have been dampened a little.
Of course the sentiment toward each company should be looked at independently in order to get a feel for the expectations specific to that stock.
With the number of reports ramping up over each of the next few weeks, I would expect the volatility to continue.
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