FLASH COMMENTS:

Based on our work, the post-FOMC meeting equity market rally will likely fail as Chairman Powell’s press conference comments do not change much, and it is our view that future talk and fears of a potential 75bps hike have a high probability of resurfacing.  

The earnings revisions backdrop, which has been one of our key supports for what was our longstanding medium term constructive view, continues to weaken.  First, it was only negative inflections, “less good”, but our key proprietary revisions indicator continues to show broadening deterioration and is heading towards the southern hemisphere and accelerating absolute cuts or “getting worse”.

Our work suggests this combination of a hawkish Fed, elevated inflation, slowing growth, rising interest rates, strong USD, continued geopolitical tensions, and an expected analyst profit cutting cycle is creating significant headwinds for the U.S equity markets.  With risk premiums also rising, we continue to signal caution and if there is a definitive downside price break of 4000 for the S&P 500 we will target 3600-3500.

Bottom line:  Be careful.  Despite the possibility of an oversold tactical bounce at some point during the first half of May, our key indicators are wea...

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