Even as the market continues its melt-up, we still maintain our cautionary approach. We’ve been asked if we feel a little bit like Chicken Little screaming that the sky is falling. The answer to that is an emphatic no.

As we always maintain, we let the data do the talking — not the headlines — and when we dig into the specifics in the earnings we’ve received thus far, what we see is not good news. While we have to tip our hats to these companies for doing what they can to generate the EPS headlines, it’s not the underlying health of their business that’s driving these results.

In this week’s Tematica Investing:

• As we march hip deep into 2Q 2016 earnings season, the S&P 500 has climbed to a new all-time high despite a smorgasbord of uncertainties that lay ahead.
• The earnings reports we have received for the June quarter are a mixed bag, favoring EPS misses and recast outlooks. This reinforces our view that earnings expectations for the second half of 2016 are overly robust and there is a high probability they will be reset over the coming weeks.
• Even those few reports we’ve received and were ahead of expectations do not paint a vibrant picture of what’s to come in the coming months. As an example, we break down Alcoa’s (AA) 2Q 2016 results.
• Given a risk to reward outlook that at least for the near-term favors more risk than reward, we will sit on the sidelines with new additions to the Tematica Select List as we instead roll up our sleeves to identify new contenders and digest the coming earnings deluge.

Click the link below to download the full report.