by Matthew Kerkhoff
Financial Sense
As technical analysts, we can easily become mired in price charts, forgetting that things like corporate profits and economic data can help fill in the back story behind the price action.
Sometimes we forget that when we buy shares of stock, we’re buying into the earnings streams of a company or group of companies. It’s this earnings stream that gives individual shares their value.
It should make sense, then, that when corporate profits are declining, shares also have a strong propensity to decline. In the chart below, we can see that the last few years have been a difficult time for corporate profits.