About Me

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 !!!

Sunday, February 12, 2017

SPX -- Weekly

Fundamentals
My weekly fundamental indicators continue in strong uptrends as they have since Feb.'16 and so
continue to support the now nearly year old rise in the market. Key monthly economic data such
PMI, production and business sales have now also fallen into line. Inflation pressure is on the rise.
It is boosting pricing power but has not yet prompted the Fed to abandon the gradual approach It is
following in setting higher short rates. Liquidity provided by the private sector appears adequate
to fund improving real growth, but the Fed is allowing liquidity to run off its balance sheet, which
is a negative that increases the risk to both the economic expansion and the stock market.


Everyone sets their own parameters, but when the Fed does not have your back, I prefer only to
trade the market and hold long positions only for less than a year. On an historical basis, trend
SPX earnings are not extended, but price is hyper - extended owing to the sharp rise in the p/e
multiple since 2011. That development makes me cautious as well, because throughout history
when hyper - extended bull markets turn down, the declines are invariably strong and fast.


For now, few investors are arguing with an improving economy, rising but not yet threatening
inflation, and a Fed that is moving slowly on raising rates.


Technical
The market rise in place since early last year continues, and, on a weekly basis, is growing more
overbought.  SPX Weekly


It is a moderate overbought and may have room to run higher, but the indicators shown suggest
that a pause in the positive action could come soon. At present, the SPX is running about 5%
above the trend line that has supported it since early 2016. keep in mind however, that a strongly
trending market such as we have currently can overwhelm conventional indicators of overbought /
oversold.



























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