Spying on JPMorgan Chase Earnings (JPM, BAC, GS, WFC, XLF, FAS)

Jamie Dimon and friends over at JPMorgan Chase & Co. (NYSE: JPM) will kick off the earnings season for the major money center banks and too-big-to-fail institutions on Friday in the early morning hours.  Thomson Reuters has estimates at $0.62 EPS and $27.02 billion in revenues.  This will mark the best bank in America’s year-end as well and the estimates for 2009 are $2.12 EPS and $110.1 billion in revenues.  Banks do not offer long-term guidance, but to show the expected recovery here the estimates for 2010 are $3.14 EPS and $108.2 billion in revenues.

The big issue we will be looking for is not the numbers themselves on earnings or revenues.  It is the credit metrics.  We do not want to see “continued declining credit metrics” followed solely by promises of metrics getting better one or two quarters out.  Dimon runs the best bank, and this needs to show more credit stabilization.  That does not mean that write-offs, charge-offs, write-downs, delinquencies, and other negative metrics will not come into play and that all metrics will have to improve.  We just want a sense of some added stabilization to justify the prices.

For the direct fallout, we have five issues we will be watching.  Bank of America Corporation (NYSE: BAC) and Goldman Sachs Group, Inc. (NYSE: GS) are tied, then Wells Fargo & Co. (NYSE: WFC).  On the ETF front we will first look at the Financial Select Sector SPDR (NYSE: XLF) trades actively during the pre-market, and then we’ll watch for posterity purposes the highly volatile Direxion Daily Financial Bull 3X Shares (NYSE: FAS).

As a reminder, this is also the same day as options expiration date.  Options traders appeared to be braced for a move of up to about $0.85 or so in either direction, which seems rather muted considering the move of the financial sector.

The chart also offers some key insight here.  At $44.69 on Thursday’s close, the 52-week trading range is $14.96 to $47.47.  If there is bad news and the stock sells off, then the 20-day and 50-day moving averages come into play at 20-$42.63 and 50-$42.49.

The analysts have given some mixed data here.  The average price target is close to $53.75, well above today’s price for an implied 20% upside from Thursday’s close.

JON C. OGG