We know that consensus S&P 500 earnings estimates have come down markedly. However, what equity perma-bulls don't know is just how poorly this bodes for stocks.
According to FactSet:
"For Q4 2015, the blended [estimated] earnings decline is -5.7%. If the index reports a decline in earnings for Q4, it will mark the first time the index has seen three consecutive quarters of year-over-year declines in earnings since Q1 2009 through Q3 2009."
so Why does this matter?
Check out the chart below. It shows what happens to U.S. equities when S&P earnings contract for more than two consecutive quarters. In short, the S&P 500 declines 20% or more.