In posts on Feb. 27, and April 3, I called attention to the rollover of MACD on the SPX monthly
chart and how prior flops in this measure over the past 20 years presaged trouble for the stock
market. The rollover of MACD occurred as the first quarter of 2015 unfolded, and the SPX has
yet to recapture the 2100 level seen earlier in the year. SPX Monthly
My concern over the past year has been that on the rare occasions when very large QE programs
are brought to an end by the Fed, the stock market has suffered, and on most occasions, the economy
has as well. Point - to - point, the SPX has been on the flat side this year, and the momentum of
business sales and earnings have eroded, with SPX net per share having gone mildly negative.
Because of the erosion of business sales and consequential profit margin pressure, one cannot say
yet with confidence that the economy has escaped this first round of strong tightening in monetary
policy and is readying to expand at a moderate pace. True, the evidence from the GDP accounts
reveals that real final demand growth has been sustained, with the volatility in performance heavily
reflecting a mild inventory accumulation / dis - accumulation cycle prompted by harsh winter
weather, the continuing effects of a strong dollar on export sales, and builds in hydrocarbon supplies.
What is troubling, however, has been the persistent decay in monthly economic data, with subdued
production and sales growth trumping reasonably good jobs and real income growth. But, so long as
jobs growth does not slow too quickly in the months ahead, the economy may be able to regain
I outlined a mini economic and profits forecast back on Sep. 27, in which I posited that the US
economy and profits should improve. However, because the p/e on the market remains elevated,
I wonder whether the market has strong and sustainable upside from the current SPX level of
around 2080 and whether, as the monthly chart shows, we may have already hit the peak in
the strong MACD progression in evidence over 2012 - 2014. This may be a conservative view,
but it is where the battery of indicators I work with leave me.
- 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 !!!