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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 !!!

Monday, March 10, 2014

Stock Market Comments

The classic sign of a market bubble -- an extended period of super powerful price momentum
which takes the market very substantially above its long term range -- is not in evidence. For the
SPX to be in a bubble, it would have to run up to about 3500 by the latter part of 2015. It has
not exhibited that kind of price trajectory for a good several years. Since bubbles always pop,
and often calamitously so, it can be very misleading to tab a speedy, positive market as a bubble
because such carries the implication of an eventual disaster. Strong, positive markets can
terminate without fierce carnage, and, if economic fundamentals dictate, a mild bull market
can end in a rout. The SPX has been getting increasingly expensive since 2011 and as such,
market risk is on the rise. However, basic fundamentals and not terminology will mark its

Price Momentum Concern
I am a bit troubled that the SPX although rising is showing a downtrend in price momentum
in its 200 hundred day price oscillator. SPX vs. 200 day m/a The uptrend in the oscillator from
the deep 2011 low has also been broken. Clearly, the deterioration of momentum measured
this way has not harmed the market over the past two years. Significant price corrections often
show up with a corresponding sharp fall in the 200 day osc., so a persistent slow fade need not
trigger off an alarm signal. But, it could be a symptom of eventual difficulty and is worth
watching for that reason.

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