Stock Market -- Weekly

The market remains in a clear intermediate uptrend. On a 40 week basis, it is approaching a
moderate overbought at a 9.1% premium to the 40 wk m/a, and it is closing in on an overbought
reading on the 12 wk RSI. Price momentum is also losing some steam. $SPX

My weekly cyclical directional indicator continues to trend up, fueled in no small measure by the
strongly improving trend of initial unemployment claims. Now you have to be careful with the
claims measure since it tends to plateau for periods after strong improvement. No clear indication
of this yet, but it is time to keep it in mind, as stock players look to this leading measure for
direction.

Now, and perhaps importantly, Fed Bank Credit, after jumping by more than $100 bil. in late
2011 on a re-opened currency swap line primarily to the ECB, has been flattening out here in
2012, as foreign central banks now apparently have adequate US $ liquidity. The monetary
base in the US, which follows the trend of Fed Credit and is closely watched by stock players,
is still rising -- a market positive -- but it too may flatten out before long. If projections for
private sector credit growth are firming, stock players may be less interested in FBC and the MB.
However, the slow thaw in private sector credit may keep some major players fixed on Fed
Credit, and if that figure stays flat, well, some nervousness may set in before long.