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Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Sunday, December 25, 2011

Stock Market -- Weekly

The action is mildy positive, volatile and only slightly encouraging.

The weekly cyclical fundamental directional indicator is in the slightest of uptrends and this
barely positive movement is being carried entirely by the sharp decline in unemployment
insurance claims underway since mid-Sep. The weak diffusion evident in this indicator is not
a confidence builder by any means. A stronger, broader advance in the indicator is needed to
support a sustainable uptrend in the market.

Although I do not count Federal Reserve bank credit (FBC) in this indicator, I need to mention that
the stock market has been tracking the substantial short term volatility in the credit balance
since Sep.  The FBC was down in Sep., up in Oct., down big in Nov. and up strongly so far this
month. Some of the recent surge in FBC could reflect spillover from the Fed's large dollar swap
program for the EU. More likely the Fed positioned itself to flood the US system with liquidity
for the holiday season, a step They have taken many times. But, since the FBC balance is now
running high relative to Its post QE 2 plan, It is likely that They will pull liquidity from the
system in Jan., a move that traders may not like early next year. Focus on the weekly open
market operations of the Fed may annoy some readers, but you need to keep it in mind if traders
are paying attention to it ( data released on Thursdays).

I read the weekly chart as showing a mild but volatile uptrend which is nearly fully confirmed
but is not robust. It's tepid, instead. $SPX At a minimum, the market needs to briskly take out
Oct. resistance at 1285. Then we need to see the 6 and 13 week m/a's break above the 40.
Failure of the SPX to take out the 1285 level will bring on the shorts, and perhaps, do so in

I have also added a link to the SPX and its 200 day price oscillator. The oscillator shows the
same weakly positive but volatile action. A move up through the 1.02 mean would be a nice
plus here. SPX & 200 Day Osc.


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