Earnings season is in full swing and judging by the near all-time highs of the equity markets you could be mistaken for thinking it was going well. Fact is it couldn’t be that much worse, as only 59% have beaten EPS estimates. If this pattern continues, then it will be the weakest earnings season since this bull market started in 2009. Top line revenue is much worse, with only 49% beating. This equates to an average gain of just 1.4% versus the prior year.
The soft economic data and weak future expectations speak directly to where we find both the Investor and 4 Year Cycles. Both are at extremes and are indicating that a top must be near (or already in). It’s generally at the top of the business Cycle that we find the equity 4 Year Cycle topping out too.
But before we see any evidence of the longer dated Cycle topping, we need to see the Daily Cycle break-down. Now on just Day 7 of a new (4th and likely final) Daily Cycle, I expect that we’re going to see the equity market turnover momentarily to form a sharp Left Translated Cycle. Once this Cycle tops and turns over, the fall should be relatively fast and severe.
But I just can’t rule out another marginal new IC high in the coming week, even though I can say with confidence that I expect that the equity markets are going to turn lower very shortly. Now that we’re 24 weeks into this Cycle, any new highs from this point forward would put this Investor Cycle into the top 3% of all Cycles (in terms of time to a top).