Will the first quarter be the trough in earnings? Second quarter earnings season will again see negative growth for the , the fifth consecutive negative quarter (the worst showing 2008-2009).

Earnings "bulls" are arguing that the direction of earnings is getting "less bad" and indeed will soon turn positive. The amount that earnings have gotten cut in the second quarter is not as bad as the first quarter, and the amount earnings have been cut in the third quarter appear to be less bad than the second quarter.

There's some truth to this: second quarter earnings are an improvement over the previous quarter (now expected to be down 5.4 percent, versus 7.3 percent for the first quarter, according to Factset), and third quarter may go positive, with fourth quarter projected to be up mid-single digits.

Bulls keep harping on this slow improvement and insist that the earnings "trough" was in the first quarter.

Truth is, earnings are still pretty lousy. Only four sectors are expected to report positive growth in the second quarter, according to S&P Capital IQ, led by Consumer Discretionary which is expected to be up over 9 percent.

That's not a big surprise. We know the consumer has been doing well.

Some industrials are expected to do well, with companies like General Electric and Boeing expected to post strong earnings. There's also some modest 3 percent growth likely from health care and utilities.

But that's the extent of the good news. Financials are going to be down almost 9 percent, and energy earnings are still awful, down 80 percent, though that is an improvement over the first quarter's down 106 percent.

This is all supposed to start turning around in the third quarter. As I mentioned, in the second quarter, only four sectors are expected to report positive earnings. In the third quarter, eight sectors are expected to be positive, with only energy (down 53 percent) and telecom (down 1.8 percent) expected to be in negative territory.

And the numbers get even stronger in the fourth quarter.

In other words, a lot has to go right for the earnings recession to end.

Bears insist that issues like higher labor costs and Brexit fallout (stronger dollar, lower rates) will derail hopes of the long-sought earnings expansion.

First, we have to have a perfect scenario where rates stop dropping and gently rise. It has to rise enough to help banks but not enough to bother other sectors.

Sound like a tall order to you? It does to me.

And what about the dollar? It rallied immediately on the Brexit news, and it's likely we will hear about that in the earnings commentary. When this happened at the end of last year, multinational U.S. companies took note because they were less competitive in the global marketplace.

So the parameters of the debate are pretty simple: where do you stand on the dollar and on interest rates? Much of this depends on where you stand on inflation. If you believe we are miles from the Fed's target of 2 percent inflation and will be for a long time, you're probably bearish on the dollar and expect bond yields to remain low.

Finally, there's oil. There is a very high correlation (0.93, according to S&P Capital IQ) between oil (West Texas Intermediate) and energy stocks. For the second half of the year, energy analysts are modelling in higher earnings based largely on: 1) production stability, and 2) steady and in some cases slightly higher oil prices. You can see this in the earnings estimates:

S&P 500 Energy Sector

Q1: $0.35 loss

Q2: $1.04

Q3: $2.27

Q4 $2.34

Source: S&P Capital IQ

Lower oil is not modeled into this scenario.

Get my point? A lot has to go right to end this earnings recession.

One final point — it's true that the stock market does not always correlate to earnings growth. It isn't now, largely because of outsized stimulus measures. But don't kid yourself — in the long run the trajectory of earnings has always mattered in the valuation of stocks.