The ongoing equity market levitation is looking like the path of least resistance is moving up, but today’s much anticipated FOMC meeting may throw a monkey wrench into the works.  While the S&P 500 has been surging during January, the debate between the Doves/Bulls and the Hawks/Bears remains quite heated. 

If one only looks at the easing of financial conditions, the dovishness that has been priced into the fixed-income markets, and certain technical analysis techniques, the ongoing rally makes some sense.  Quite frankly, if my tools had picked up on this dramatic shift in these factors, I would likely have tempered my bearishness somewhat, at least in the short term. 

Interestingly, the Doves/Bulls are dismissing a lot of negatives for the equity market by saying they are either already fully discounted, they don’t matter, or the “Market is always right”.  Well, my work suggests that some negative considerations may not be priced in, and they should not be ignored. I have been discussing for several months that the outlook for corporate profits is too high, and will need to be lowered, and they matter, which I will once again discuss later in the note. On the topic of “the Market is always right”, I am generally in agreement ...

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