Well, that was a little ugly, though in retrospect it wasn't all that surprising. What I'm talking about, of course, is Wednesday's decent-sized dip from the market. That being said, I'm not as worried about the depth of the pullback as I am about the possibility that it started a much bigger (and somewhat overdue) correction. Then again, the bulls were pushing back a little near the end of the day. We'll poke and prod the market in a moment. First we need to take the detailed look at real estate data we promised you yesterday. Housing Market Still Going Strong I'll confess to you I'm a little but surprised how home sales didn't get hit too hard in August and September, when interest rates were headed higher and the Fed didn't seem to care. But, numbers don't lie. Those numbers? Existing home sales may have fallen from a pace of 5.39 million to 5.29 million in September, but that's still strong. Though we don't have September's price data yet, we do know as of August the average new home sold for $205,900... a multi-year high, extending a lengthy trend. Inventory levels didn't shoot up last month either. In fact, home-inventory fell to 2.21 million units, maintaining a tight supply/demand situation that's keeping the market healthy. The only data we don't have in hand yet is the new-home sales level for September, and the Case-Shiller index. But, we don't really need them to come to a conclusion that the real estate market is doing reasonably well, in the shadow of yesterday's healthy progress on the employment front. Could it be the economy is doing ok? It sure looks that way. The pros don't disagree either, judging from the recently-published earnings outlook for 2015 (see below). The problem I have is, those earnings outlooks don't feel all that plausible to me even though the employment and housing pictures are saying they are plausible. Long-Term Earnings Forecast Out of Reach? While I try not to wax too philosophical with you - and keep our analysis to short-term, actionable points - this is a case where it's worth venturing off the beaten path. Remember a few days ago when I was complaining about the S&P 500's lofty earnings growth estimates for 2014? Analysts were looking for a profit of $122.11 per share, up 11.7% from 2013's likely EPS of $109.28. Well, according to yesterday's outlook from Thomson Reuters, the S&P 500 is expected to earn $135.11 per share in 2015, which would be an 11.0% increase on 2014's bottom line. Now, nobody likes big growth as much as me. I just don't see how it's going to happen when revenue growth has done well to reach the 3.0% level for the past few years, however, and isn't expected to grow any faster in the foreseeable future. The National Association for Business Economics says most economists think next year's GDP growth will be between 2% and 3%, with a handful more of them not even thinking next year's GDP growth will top 2.0%. And just for the record, as troubled as earnings have been this quarter, sales growth has been an outright disaster all year long. The number of S&P 500 companies that have missed revenue estimates has been less than half since Q1. That's sub-par. In other words, for the S&P 500's companies to reach those target earnings levels, they're going to have to do a lot more with not much more (and disappointing) revenue. But, earnings margins are already at near-record levels; there's just not a lot of room left to widen margins. Now, I'm not saying we're headed for a new bear market. I see the broad improvement in the employment picture, and the subsequent recovery of the real estate market. But, excessive expectations are excessive expectations no matter how you slice it, and they're not going to make things easy for the market. What I'm saying is, if it's the 2014 - and now the 2015 - earnings forecasts doing most of the bullish work for stocks now, I've got a nagging feeling investors are going to be disappointed, which is going to be a drag on stocks. It's not going to affect our usual short-term ebb and flow calls, but it's likely to make long-term investing a tricky affair until the opposing revenue trends and earnings expectations are rectified. We'll look at the idea again later when it's more relevant (and we have more data). We just wanted to get the info to you as soon as it was published, so you can do with it what you will. Honestly though, I don't know that I'd "do" anything with it right away, because it's a long-term piece of data. Just keep it in mind. Now, about today's action from the market... On the Fence For the same reason I couldn't get too bullish based on yesterday's strength, I don't want anybody to jump to bearish conclusions based on today's selling. The reason? Because the selling effort wasn't all that strong. It even petered out around mid-day. Folks, traders just aren't sure what to do here, but I do get the sense most traders know the market is technically overbought here, and ripe for a small dip. None of them are willing to take the first step to that end, but that overhang is still, well, hanging over our heads. The reason I'm sticking with my pullback theory is best shown on a bigger-picture daily chart of the S&P 500, which has ebbed and flowed several times since April. Most of the dips have unfurled when the upper Bollinger band was bumped into, as it was last week. That's the reason for the stalled rally now. Take a look. Yeah, it's the same story we've been telling for months. Don't shoot the messenger - there's nothing we can do about the market's schizophrenic movement. We're just helping you navigate it. With all of that being said, neither the bulls nor the bears have a lot of evidence to make a case with right now. However, one more bad day for stocks could push the market over the cliff. What I'm specifically looking for is a close under today's low of 1740.50 for the S&P 500. A move under that floor should sufficiently spook most investors into a selling mood. As for where the bleeding will stop once it starts, we'll cross that bridge when we come to it. Just know that even a short-term bull trend from here should start with a small pullback to bleed off the overbought pressure; we're not going to start a major rally with this kind of froth in place. A slide to the 1710-ish area is probably in the cards no matter what. The question is, will that be where the bulls start to nibble again? We'll answer the question when the time comes.