Despite a full slate of data, continuing international events, Washington maneuvering, and a possible record in Fed speeches, a new subject will command attention this week:

Will there be an earnings recession, and should we worry?

Prior Theme Recap

In my last WTWA I predicted that attention would focus on reasons behind the recent stock market volatility. That was a good guess. CNBC stayed with that theme late in the week as volatility dwindled. Steve Liesman even asked NY Fed President Dudley about the Fed role. His answer? Volatility was caused by world circumstances and the nature of the decision, not Fed policy or messaging. Most of the trading community was blaming the Fed anyway. To get the full weekly story, let us look at Doug Short's weekly chart. This one saves more than a thousand words! (With the ever-increasing effects from foreign markets, you should also add Doug's weekly chart to your reading list).

While I naturally take a week-by-week approach, Doug's update provides multi-year context. See his weekly chart for more excellent charts and analysis.

We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react. That is the purpose of considering possible themes for the week ahead. You can make your own predictions in the comments.

This Week's Theme

Despite the economic data and non-stop Fed chatter, the coming week will focus on earnings. In particular, there is the chance that year-over-year S&P 500 earnings will decline for the second consecutive quarter. Because of the two-quarter angle, some cite this as an earnings recession. I expect the pundits to be asking:

Will there be an earnings recession? And does it matter for stocks?

As always, the viewpoints are varied. I will emphasize the main ideas in this list, but there are plenty of gradations.

• The earnings decline is serious and might imply an economic recession. The two are often “associated” in time.
• Earnings will decline but it is temporary and not indicative of an economic recession.
• The earnings recession is focused on energy and materials. Both are improving.
• Earnings reports and estimates are firming.
• The 2016 outlook is more positive.

Preview Material

To get ready for earnings season, it helps to have background facts. FactSet's data shows a current forecast of a 5.5% decline for the quarter versus last year. Allowing for the gaming of lower the bar to help beat estimates, the decline might be much smaller. We might even avoid the technical earnings recession. It is also possible that full 2015 earnings will show a decline.

Brian Gilmartin notes the poor earnings results from last week, and asks the right questions about energy and China. The energy effect is not close to a conclusion, as this table shows:

• Q2 '14: +17%
• Q3 '14: +10.3%
• Q4 '14: -21.8%
• Q1 '15: -57.9%
• Q2 '15: -56.4%
• Q3 '15: -64.6% (est)
• Q4 '15: -63% (est)
• q1 '16: -23.8% (est)
• q2 '16 -12.3% (est)
• Q3 '16: +25% (est)

Brian's Source: Thomson Reuters “This Week in Earnings” dated 10/9/2015

As always, I have my own ideas in today's conclusion. But first, let us do our regular update of the last week's news and data. Readers, especially those new to this series, will benefit from reading the background information.

Last Week's Data

Each week I break down events into good and bad. Often there is “ugly” and on rare occasion something really good. My working definition of “good” has two components:

The Good

There was not much economic data, but some of the news got a bullish interpretation from the market.