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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 !!!

Tuesday, July 17, 2012

Stock Market -- Weekly

The post below did not make it out on Sun. 7/15 because of a severe thunderstorm that
took out the local internet and even destabilized wi fi...

My weekly cyclical fundamental indicator (WCFI) has improved sharply over the past three weeks
primarily reflecting much weaker initial unemployment insurance claims data. That labor
development can happen around the July 4 holiday, so it will take a couple of more weeks of
data on claims to see if there was a merely seasonal brightening. If claims data stay weak,
that could be a nice plus for the market. The lack of stock market upward mobility over the
past two weeks despite improved key indicator news suggests players are waiting to see if the
better claims info is purely seasonal. Other categories of the WCFI have steadied -- a good sign.

Fed Bank Credit remains around where it was when QE 2 ended on 6/30 /11. Since the market is
now no higher than it was in the spring of 2011, it continues to show that an advance may well not be
sustained without further QE. My explanation for this remains that private sector credit growth
is simply too low to sustain a market advance without perhaps a major rotation out of Treasuries.

I think we are in unchartered waters here regarding money and credit balances. The closest we
come in terms of precedent is the 1937 - 38 period and since much of the monetary and credit
data for this difficult period is reconstructed, it is unwise to be dogmatic, but maybe prudent to
be cautious in the absence of further QE.

The weekly chart is inching toward a more positive bearing but reflects the lack of bullish
conviction that would add positive price momentum that is lacking. SPX Weekly Chart

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