Last earnings season the bulls were trumpeting the strong reports and favorable guidance. Then when the Fed infatuation took over the markets, the bulls quickly shifted to the argument that the Fed should stop raising rates to avoid overshooting an economy that was clearly cooling. Somehow we went from strong earnings to not so strong future earnings in record time. It’s fun to watch investors who can switch so quickly between seemingly opposite points of view. Now we are back to earnings season with Alcoa kicking things off tonight and it’s time for the bulls to put on their other face. Or if not a whole happy face, they can at least talk out of the other side of their mouth and shout with joy about every positive earnings announcement and guidance. And oh yeah, try to downplay negative stuff like Friday’s 3M warning. Once we get through earnings season, they can go back to the dour prophecies of a slowing economy. That should be just in time to ramp up the rate pause rhetoric before the August Fed meeting.

Regardless of the noisey spin, I am intrigued by earnings season this time around. Usually I dread the confusion that this quarterly fiasco puts into the data that I use to decide on my signals. However, there are so many other competing factors (oil, geopolitics, etc.) that are making things difficult and for once, I am relying on reactions to earnings and guidance as a means for providing some clarity to the direction of this market. I have been struggling mightily for the past few weeks and believe that a shakeout in one direction or the other is coming. As I wrote last week, I am reluctantly becoming less pessimistic (as opposed to being more optimistic) and yet, my near 50/50 on UP and DOWN signals tells me that I need to be ready to quickly react. I rarely change signals on the same stock in consecutive weeks to avoid turnover, transaction costs and whipsaw performance. However, I am temporarily putting that prohibition on the shelf until further notice. If you don’t care for short term trading, then I strongly suggest you look at any Hedgefolios signal change with a lot of skepticism. On the other hand, if you appreciate rapid responses to the market - I think it’s going to be fun.