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Earnings season kicked off in full force Monday with Alcoa Inc. (NYSE:AA), the biggest U.S. aluminum producer, announcing first-quarter earnings after the market close that beat expectations. Alcoa was the first member of the Dow Jones Industrial Average to report.

While it may not feel that way on Main Street and in the housing sector, earnings at public companies are healthy. According to Bloomberg:

  • Corporate profits probably rose to a record last quarter.
  • Earnings for Standard & Poor’s 500 Index companies probably gained 12 percent in the three months ended March 31, from a year earlier, according to analysts’ estimates.
  • Profits of Stoxx Europe 600 Index companies likely increased 21 percent.

We mentioned back on March 21 that materials (NYSEARCA:XLB), energy (NYSEARCA:XLE), and industrials (NYSEARCA:XLI) were well positioned. Not surprisingly, they are projected to report strong earnings growth. We continue to have a tentative bullish outlook. We still like mid-caps (NYSEARCA:IWP).

Earnings projections by sector

The market (NYSEARCA:SPY) has been treading water waiting for earnings – stocks have stalled near a logical point (see below).

click to enlarge images

Support and Resistance

Stocks have also held at a logical point near the thin blue line below (monthly chart).

Support and Resistance

Buyers have been less enthusiastic in recent sessions and momentum has slowed considerably in the short-term. If we pull back, the next areas of basic support are shown below.

Support and Resistance

Source: Earnings Are Healthy; Momentum Slowing Short-Term