Earnings Season: Five Things We've Learned So Far

3. Investors are Stuck in the Middle

One of the primary reasons the markets haven't moved much in the past few weeks is that investors actually were expecting a strong quarter and, with the news now passed, will need more convincing to keep up the breakneck buying pace.

"We're at equilibrium here based on corporate profits, earnings and expectations," says Michael Cohn, chief investment strategist at Atlantis Asset Management in New York. "The market tells you what's going to happen in the future, and when expectations are fulfilled it sells on the news.

"There's not really all that much to look ahead to. The market made its prediction, the prediction's coming true, now the jury is out for the next quarter."

And there could be a bit of disappointment out there that earnings didn't post even stronger beats on analyst estimates—part of the "whisper-number" factor in which traders often decide on their own what the real earnings number should be.

"It leads me to believe there's a certain amount of financial engineering going on within authorized generally accepted accounting principles, but nonetheless earnings appear to be surprisingly good," says Emily Sanders, president of Sanders Financial Management in Atlanta. "The magnitude of earnings beats speak to the fact that we're against very low expectations, but still our view of the economy is that it really has not turned around yet and is still less worse than it was a year ago."

4. Will the Patient Stand on its Own?

Investors often pay as close or closer attention to earnings outlook than the actual numbers themselves. But forecasts are even more important this year as the government prepares to lower the curtain on economic stimulus measures.

"The economy will have to stand on its own two feet more than it has up to this point," Sanders says. "We have been awash in a lot of liquidity, but the downside of all that is starting to be foremost in people's minds."

While the market engages in a lively debate over whether inflation or deflation poses a greater threat, there is consensus that the Federal Reserve and Treasury will have to be skillful in how they deploy their respective exit strategies.

Bel Air's Flam compares the mission to that of Capt. Chesley "Sulley" Sullenberg's daring landing of a passenger jet in the Hudson River on Jan. 9.

Fed Chairman Ben Bernanke and Treasury Secretary Timothy Geithner will have to "pull a Sulley," Flam says. "You've got to land the economy on the Hudson here. You pull back too quickly and you can kill any budding growth, and if you do it too slow you can spur inflation. They have to touch down just right."

5. Sitting Tight

Market analysts continue to worry about a lack of market conviction, and reticent investors are likely to continue to be the norm.

Equity fund inflows actually increased last week to $6.55 billion—the biggest number since May—but many advisors are telling their clients to tread carefully.

"We're playing it defensive," Sanders says, adding that her firm is doing a lot of short-term trading and sticking with dividend-paying stocks. "Short-term there's a lot of competing interests to resolve some of the big, open issues like financial regulation, health care—the market doesn't like uncertainty."

For Cohn, this is setting up as a good time to collect some profits until the market shows it's ready for another leg up.

"I would take a few chips off the table here," he says. "No one ever lost taking a small profit."

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