The “earnings season” is the period each quarter when the vast majority of corporate earnings are reported. The bulk of the stellar gains in the stock market this year have occurred around earnings season. Alcoa (AA) typically kicks it off around the 3rd week at the start of each calendar quarter and 6 to 8 week market rallies have ensued. Should this pattern repeat, then we should begin to see upward price action around the 3rd week of July and price acceleration in August. While we have already edged into the price and time window for our expected medium term top in 2017, we will be interested to see if sentiment measures finally become overbought should this rally continue to the upper end of our time and price window.

The earnings improvement in early 2017 was virtually guaranteed with the exceptional year over year comparisons of the energy sector and technology. While the energy comps will certainly lead the various stock market sectors, the sharp 15% drop in 2nd quarter Oil prices may cause some negative surprises. The Oil price movement in July and early August may provide a bias for how well this next round of earnings are received by investors.

Anticipation of future earnings acceleration on the promise of Trump’s promised Corporate tax cuts along with improving global growth has sent stock market prices in the US and abroad rising faster than earnings in 2017. Any serious earnings season miss or perceived blockage of expected 2017 tax cuts will send stocks down sharply given the high expectations and extremely low volatility (VIX Index).