…that analysts have increased their "Buy" recommendations on these stocks, not reduced.

In fact, 17 of these 25 SPX stocks have seen more analyst "Buy" recommendations.

Now, I understand the whole value argument that can cause analysts to move from a "Hold" or "Sell" to a "Buy." But those of us who watch this data remember that, during the bear market five years ago, most stocks didn't bottom until we saw analysts tire of the value argument and change their recommendations to "Holds" or "Sells."

As I said, bottoms typically happen when they aren't expected. And they're expecting it, from the looks of their list of stocks to buy.

Wall Street's Wishful Thinking

In addition to their stock recommendations, the analyst community has yet to massively adjust to earnings expectations to bring the value equation back into reality. Looking forward to 2009, Zack's earnings research reveals that expected earnings growth is set at about 15%. It doesn't take a degree in business or economics to classify these expectations as overwhelmingly wishful.

The earnings expectations situation suggests that we will begin to see companies lower their outlooks for 2009, and potentially longer. Just this week, General Electric (GE) announced that it would stop issuing earnings-per-share (EPS) guidance.

I don't blame them. Would you want to tell everyone that your earnings are going to be lower than expected without giving it the old college try at hitting the number?

This follows the idea of it being easier to ask for forgiveness instead of requesting permission to underperform.

No matter how you cut it, the market appears to remain overvalued. Many will point to P/E ratios that have dropped as a sign that the valuation play is in full force. In fact, P/E ratios haven't dropped as much as they should, since both the "P" (price) and "E" (earnings) are moving lower (though the "E" is moving slower).

Not until we expect earnings to start moving higher, not lower, should the value flag should be raised for all to see. Until then, short-term traders will continue to have their way with the market instead of the long-term buy-and-holders.

As for me, I'll be looking forward to Alcoa's (AA) earnings announcement when it officially kicks off on Jan. 8 because that's when the real fun begins.

I hope you'll join me for earnings season and sign up for my FREE daily e-letter, Earnings Edge, which debuts the day AA's numbers hit the tape. Not only will I be sharing my insights into the numbers that the companies are (or aren't) turning out, but I'll also give you FREE earnings-based option trades to take advantage of the abundance of opportunities available during this magical money-making season. Learn how to double your money with options trades during earnings season today!