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Earnings Season

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January 17, 2012 – Comments (0)

Earnings season moves into full swing this week. The last earnings season was quite good compared to expectations. In my opinion, it was the primary driver of the strong October '11 broad market rallies. Now, as we approach 4th quarter earnings, I think expectations are overly exhuberant and the recent rally since late December has lacked volume.  I continue to see bearish signals all around. Most of my technical analyses have prompted sell signals for most of the past few days some bearish indications have occurred for more than two weeks.The consistant failure of these signals is highly unusual. Ryan Mallory mentioned the "January Effect" this past week as a possible explanation. The January effect is well documented and certainly a plausible explanation.  "The most common theory explaining this phenomenon is that individual investors, who are income-tax-sensitive and who disproportionately hold small stocks sell stocks for tax reasons at year end (such as to claim a capital-loss) and reinvest after the first of the year. Another cause is the payment of year end bonuses in January. Some of this bonus money is used to purchase stocks, driving up prices."

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