Warnings Season is Here, These ETFs Could Suffer

In just a couple of weeks, second-quarter earnings season kicks into high gear, but the lull before those reports start rolling really is not a lull at all. Before earnings season, there is warnings seasons and investors have been enduring a spate of cautionary tales of sluggish profits for several weeks now. With the warnings spigot flowing hard and fast, several sectors are looking vulnerable to earnings disappointments. In some cases, that vulnerability increases by the day. Those looking to short ETFs that could potentially see more earnings warnings and/or low-quality earnings, should consider the following funds.

Earlier this month, Halliburton

, the world's second-largest provider of oilfield services, said it believes that its North America margins will be impacted 300 basis points more than its previous guidance of 200 to 250 basis points, for a total impact of 500-550 basis points lower than first quarter levels. The problem with a warning from a marquee oil services name like Halliburton is that it very well could mean more glum news from rivals is not far behind. Surprisingly, IEZ has traded higher since the Halliburton warning, but consider the catalyst for that warning. The company said the price of

. Guar gum is a food ingredient, but it is used in hydraulic fracturing fluids. Translation: Halliburton is not the only IEZ constituent using guar gum and that probably means Halliburton is not the only oil services being pinched by rising prices for the material.

The Market Vectors Steel ETF has its hands full. The fund has plunged more than 22 percent over the past 90 days. Not only that, but since June 15, two SLX holdings, Steel Dynamics

and AK Steel

. There are no guarantees XLE's constituents will be issuing warnings, but it would not be all that surprising if Exxon, Chevron, Occidental Petroleum

or comparable firms do tell investors to temper their expectations.

Projecting earnings warnings from MOO holdings is a tough call to make, particularly because Agrium

recently issued bullish guidance. On the other hand, the impact of

. Natural gas is by no means in a bull market, at least not yet, but the commodity has started to show signs of life recently. That is not good news for a company like CF Industries

, the largest U.S. nitrogen fertilizer maker. In the case of MOO, it must be noted the nitrogen fertilizer firms are just one part of this ETFs lineup and not the primary determinant of MOO's returns. Goldman Sachs is bullish on fertilizer names and raised its

, which implies significant upside from current levels. Just do not make the mistake of looking natural gas futures. Since the start of June, the U.S. Natural Gas Fund is up almost 9%. CF is flat.