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ISI also thinks that companies simply won't let profits fall off that much. Collectively, the stocks in S&P are pegged to earn $17.90 in the fourth quarter. ISI believes they'll do a dime better in the first quarter, bringing earnings up to $18 a share. So, sequentially, companies don't have to do much better to achieve a 13.4% growth rate compared with a year ago when earnings were $15.87.

If ISI is right, there could be some short-term upside as stocks and profits adjust to an upwardly revised consensus. The obvious risk here is that the market figured this out in mid-October and the move in the S&P to 1,200 from 1,100 was triggered by that adjustment. So watch guidance from some major companies that should be coming in several weeks. If their stocks get a pop from upwardly revised guidance, that could be a sign that the market hasn't already discounted better first quarter profits.

But hold on. We're only talking about one quarter and the market discounts profits six months to a year in advance. In fact, ISI Chairman Ed Hyman does see a profits slowdown on the way. He thinks the Fed's interest-rate tightening will slow the economy and profits along with it. Now we get to the real decision to be made.