About Me

Retired chief investment officer and former NYSE firm partner with 40 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 !!!

Monday, October 15, 2012

US Stock Market Comment

The market has experienced a mild correction since mid - Sep. Moreover, my weekly
cyclical fundamental indicator (WCFI) has been rising over the period. The action of
the market has correlated negatively with the WCFI over the past three weeks as well,
and this counts as an unusual development. Now, since the start of the recent rally in
early Jun., the market did outperform the WCFI by a wide margin over most of the
period, so it is not unreasonable to allow for some catch - up from the short term
fundamentals. I note also that within the WCFI, sensitive materials prices have turned
flat and volatile in recent weeks and have failed to confirm an otherwise improving
economic outlook. Because industrial commodities prices can behave in accord with
micro supply / demand factors rather than macro factors over the shorter run, it is early
to claim that the upturn in mfg. and commercial order rates and retail sales will likely
prove shortlived. Even so, it may well have set some market players to wondering.

The long Treasury bond yield ($TYX) is very sensitive to industrial commodities prices
and as the SPX chart link below shows, an intial cyclical rise in the 30 yr yield has re-
cently been aborted, which suggests that bond traders are also not so sure that the economy
is setting up to do better. The short term technical indicators I use with the SPX  are
deteriorating, but the market did bounce off the 50 day m/a today, which traders who prefer
this m/a will find positive ( I prefer the 10 and 25 day ma's with a daily chart).

The loss of recovery momentum for sensitive materials prices and the fail of the 30 yr T
bond yield do provide a degree of corroboration to the idea that as we close in on the
end of calendar 2012 with likely election results not yet clear, capital markets players
may be growing more concerned about the eventual resolution of the "fiscal cliff" due up
on 1/1/13.

SPX Daily

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