The rebound in equity markets reversed course on Tuesday with the S&P 500 falling more than 2.0% at the low of the session. The move comes on growing fears of margin compression in Q2 and beyond that will result in downward revisions to earnings. Looking at the market from the perspective of earnings, the S&P 500 is valued on the expectation of future earnings power which means a downtrend in EPS outlook will result in a downtrending market. In that light, Tuesday's decline looks like a trend following movement and one that could result in a new low very soon.

The next catalyst for the market, other than unexpected news, will be the PCE price index on Thursday. Even if the index were to cool or even decline the outlook for inflation remains robust. Without some change to the fundamental outlook, the FOMC should be expected to hike rates by 75 basis points at both of the next two meetings.