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The Day Ahead: Earnings-Season Rage-Out

It's strange how humans evolve, especially those special folk we call "stock handicappers." At the age of 21, I didn't know what an earnings season was in theory or in practice. At 23, I was eagerly learning the ins and outs to identifying corporate bull on earnings calls and post-call follow-up chats -- and sleeping on top of a conference room table, unbeknownst to anyone else. Four years later, I didn't begin the process of shutting out all of humanity -- for their own safety -- until two weeks into earnings season.

Now, at 30 -- which is really 60, as anyone close to me would know -- I am finding myself highly sensitive at the very start of earnings season. For me, it's "game on or die." Invest the time to amass information, or risk being that slacker who's repeating their three taking points on UPS (UPS) because they chose a night on the town instead of an evening with an earnings-call transcript. Hey, play on, playa.

With regard to this particular earnings season (which apparently is irrelevant), my more rugged, hardened self is testing old rules of thumb, in addition to monitoring trends, to be sure the market is not beginning a fresh rally based right under my nose.

Honest Abe's Rules of Thumb: Cliffs Notes Edition

"Relative outperformance of higher growth sectors, supported by indications of accelerating macroeconomic trends, is a sign of changing future fundamentals."

Many eyes have turned to data improvement in September vs. August as packing the punch to reactivate the rally. On Tuesday, the new dot-connecting exercise was that upside in industrial production meant a manufacturing employment revival -- which had lagged -- and, along with it, longer workweeks and checks to offset gas inflation. All in, this was to drive a very merry holiday season.

The industrial and retail complexes percolated in the face of subpar earnings from W.W. Grainger (GWW), WD-40 (WDFC) and Wolverine Worldwide (WWW). There are some mighty rosy assessments here, but it still doesn't sit well with me, seeing as TJX Cos. (TIF - Get Report) has plunged, and it's absurdly clear that Europe's industrial performance was horrendous, causing a double-whammy of missed third-quarter earnings and lowered expectations for the balance of the year that exceeds the third quarter shortfall. So I render this rule of thumb as not being truthfully satisfied.

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Chart of I:DJI
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