SPX -- Daily

The overbought readings for the SPX in both Mar. and Apr. have begun to yield some
 selling pressure. SPX Daily

This seems to be a normal development following such a strong run up in the index from the
Feb. low. The issue now is how deep the sell off will run. The chart shows short term support
around SPX 2040. A breech of that level would suggest some more pain may be on the way.
It is also worth noting that a still rising oil price is not now supporting the uptrend of the SPX
(WTIC is in bottom panel of the chart).

It is entirely possible that players may be growing apprehensive here in the face of stronger
economic and inflation data coupled with Fedspeak calling a short rate increase for June a
'live option'. Straight off, the fundamental case for hiking the FFR% in June is simply not there,
so should the FOMC elect to boost rates again, it would be about as unwarranted as was the
Dec. 15 hike. Speaking editorially, such Fedspeak, particularly from non-voting members of
the Board, only adds to market uncertainty and volatility.

If the economy can maintain a faster pace of expansion, profits will begin to recover nicely
and another 25 or 50 basis points up in short rates should not change valuation parameters
materially. I am hoping for this and do not see a compelling reason to get into a tizzy about
share prices. But since market sentiment has been growing more bearish for quite some
time, I could wind up eating those words. (Scroll for May 8 post on sentiment.)