The S&P 500 keeps grinding higher despite a fair amount of skepticism from investors, and the continuing slow deterioration in the economic backdrop, both domestic and global, which continues to feed the negative earnings revisions cycle that I have been forecasting for many months. 

The NAHB market index has now fallen for eight straight months and has now achieved its worst streak since the 2007 housing market collapse.  The data release was not only a downside surprise, but also was worse than the most pessimistic forecaster in the Bloomberg survey economists.   In addition, the NY Fed’s Empire State Manufacturing Survey also plummeted well below Street expectations as it posted its 2nd biggest monthly drop on record.   With the release of the UMichigan survey last week that showed falling inflation expectations, the bulls are feeling frisky with the “bad news is good news” interpretation from the economy that will cause the next Fed easing cycle to begin sooner rather than later. 

As has been the case, my medium-term work, as well as my view on the Fed, still does not support the view that the “all-clear” sign has been flashed and we have begun a new bull market following the S&P 500 low in June.  When looking a...

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