by Ben Warwick, thinkadvisor.com

We’re about half way through the current earnings season.  According to JP Morgan, 80% of companies in the S&P 500 have beaten estimates. That’s higher than usual, but should be taken with a grain of salt, as EPS is running about 8% lower than the same quarter last year.

Equities have run the gamut this month. A buying spree put the S&P 500 up about 2% on the month, but the surprise announcement from Carl Icahn that he is out of Apple (AAPL) stock due to concerns about China put traders in selling mode. As a result, most indexes (see table below) ended the month about where they began.

So what does that tell us about investor sentiment?

It’s surprising that blowout earnings from Facebook (FB), Amazon (AMZN) and a few other top-tier names failed to ignite a rally on Wall Street.  Even after Warren Buffet dismissed Icahn’s move as nothing more than a publicity stunt, stocks continued selling off.

This behavior coincides with a recent AAII survey showing only one in three investors isoptimistic. With fund flows still running negative, it seems that investors are hunkering down for a long dry summer.

Contrarians would see such indications are bullish, a view that I agree with. Combined with the uptrend in commodities, a slight uptick in China and a Fed that won’t be able to raise rates, I would be more inclined to buy dips than sell rallies.

I still favor credit, though, as a low-risk way to add return in a low-inflation environment.

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