The economic recovery appears to have picked up some speed recently, but the apple of
the investor eye remains the ongoing powerful round of QE from the Fed. Fed Bank Credit
has now expanded by more than $1 tril. over the past year. That's an increase of nearly 36%.
Perhaps coincidentally, the SPX has risen by nearly 42% since mid-2012 when the Fed
opened the the door to new QE. Since the economy has tended to struggle without the QE
during the recovery period, the issue of when the Fed may begin to curtail the growth of its
balance sheet remains a topic of intense interest. The market remains driven by speculation
and not value with players assuming there are still a goodly number of greater fools out there.
The SPX remains in a cyclical bull market dating from 3/09. SPX Weekly Longer term
trend support is now around the 1700 level SPX. The chart shows the market is
overbought on RSI, MACD and the 52 wk. rate of change measure as well. The old rule
of thumb going back many years is to be careful when the yr/yr momentum gets up near
30%. The market is also getting extended on a 20 wk. price channel (Keltner).
Scroll down to the 11/3 post on the equities only put to call ratio ($CPCE). Sentiment is
very strongly bullish and confidence remains high (low $VIX). This chart shows that
bullish regard is getting a little intense for comfort.
- Peter Richardson
- 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 !!!