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About 1/3 of the S&P 500 reports this week so there should be lots of opportunities for baragain hunting – unless, of course the earnings are not good and we finally begin to deflate this bubble market. This will be the first week in 4 years that there is likely to be more focus on the markets than the Government as the Government goes back to "normal" functions with a President who doesn't try to dominate the news cycle.

That shifts the focus back to earnings but one might wonder how earnings can possibly justify the sky-high valuations we have been giving most stocks in the past few years. According to Jill Mislinsky at DShort: "The peak in 2000 marked an unprecedented 129% overshooting of the trend – substantially above the overshoot in 1929. At the beginning of December 2020, it is 154% above trend. The major troughs of the past saw declines in excess of 50% below the trend. If the current S&P 500 were sitting squarely on the regression, it would be at the 1457 level."


154% above treand. That's a lot! While I don't see the S&P going all the way back to 1,457, I do see a 20% correction almost inevitable, back to about 3,000 and, while we may go higher, we'll still pull back at some point so 3,829 (this morning's open) is a very tough pill to swallow on the S&P 500.

Chicago Jan  25 2020
Calendar Jan  25 2021

We do have a Fed Meeting on Wednesday and the Chicago Fed National Activity Index was in-line this morning but again, 20% of our GDP is stimulus and we are celebrating very slight growth – this is a very dangerous thing to get used to!

Dallas Fed comes out at 10:30 and tomorrow we get Home Prices and Consumer Confidence, Wednesday it's Durable Goods, Investor Confidence, Business Uncertainty and the Fed and then Thursday we have GDP, Retail Inventories (very important after Christmas), New Home Sales, Leading Economic Indicators and the KC Fed. Friday we finish the week with Personal Income, PMI and Consumer Sentiment – a very busy data week with NO Fed speak – other than Powell's press conference on Wednesday, of course.

What a great week to see how the market stands on its own, without all the political turmoil or endless promises of MORE FREE MONEY. Will we get through the week still holding these lofty levels? Stay tuned to find out…