The first chart describes the unprecedented plunge in corporate earnings and the second chart shows that next week will be pivotal for the S&P 500.

Regards - VHF

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While the stock market is up sharply since early March, the economy as well as corporate earnings continue to suffer. Today's chart helps provide some perspective as to the magnitude of the current economic decline. Today's chart illustrates that 12-month, as-reported S&P 500 earnings have declined over 90% over the past 20 months (with over 90% of S&P 500 companies having reported for Q1 2009), making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative.

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S&P 500 At Key Inflection Point

B.I.G.

May 15, 2009

The S&P 500 Financial sector is down just over 12% from its recent intraday high last Friday. And heading into next Monday, the sector is currently sitting at a key inflection point that should help identify which way the sector will trade over the next month or so. As shown below, the Financial sector is currently sitting right on support that formed when the sector hit its highs in early April. It's also sitting right at the bottom of the tight uptrend channel that it has been trading in since the March lows. If the sector can hold its price and then trade higher on Monday, technicians will interpret this as a sign that the rally will resume. If the sector breaks support and trades down, the uptrend will be broken and lower prices will most likely ensue.