FLASH COMMENTS:

With the S&P 500 once again trying to rally from a tactical oversold condition, the following bullish chatter and hope is resurfacing:

  • The Fed about to signal something less hawkish.
  • There has been fundamental capitulation and future earnings cuts do not matter. 
  • The bottom is in because the S&P 500 was not able to definitively break below 3600-3500.
  • Excessive negative sentiment and bearish positioning will propel us higher combined with a bullish election cycle and fourth quarter seasonality.

My work still does not support the views from above and my four counterpoints are the following:

The Fed may have to do MORE than what is currently priced in, which is out of consensus and certainly not priced into the equity market, which is an incremental new and developing view. Earnings DO matter and based on my analysis most certainly shows that the negative earnings revision cycle has further to go to reach max negativity.THE bottom is NOT in, and considerable downside risk remains for the U.S. equity markets.Yes, there is a degree of bearishness that could support countertrend tactical rallies and is probably my biggest worry point for my longstanding unfavorable view as we move into the historically favorable seasonal period into year end....
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