Stock Market

Fundamentals
The weekly fundamental coincident indicator remains in a firm uptrend, although positive
momentum has dissipated some in recent weeks. The stock market has not kept pace with the
weekly indicator. There has been a degree of rotation back into the markets of faster growing
economies, and, in the case of the SP 500, there has been rotation into the smaller cap. sector.
Even so, the market has not been bouyed by improving short term fundamentals.

I use the oil price as a longer term leading economic indicator. With WTIC at $112+ bl. and
trending higher, the longer term outlook for economic and profits growth is deteriorating. It is
not so easy to say conclusively that the recent run up in the price of crude has punished the market,
but the sudden surge of 30% in the petrol sector since the SP 500 made a cyclical high on 2/18/11
alerts traders that cost pressures are building for companies, and it also may well be the case that
aggressive hedgies are rotating out of stocks into petrol sector futures.

Technical
On my weekly chart, the $SPX is flirting with rolling over to the downside. The inability of the
recent rally to decisively take out resistance at the prior cyclical peak of 1343 is not encouraging
either. $SPX

Psychology
Earnings reports for Q 1 lie just ahead. with few negative pre-announcements, players are hanging
around in positions to see if earnings might top expectations enough to squeeze out more upside
action.Tricky business.