SPX-- Monthly

Back on 10/2, the monthly MACD indicator for the SPX had just experienced a positive cross
and because I trust the indicator, I suggested the market could be poised to rise in the months
ahead. I suggested in the title that we could be entering a 'brave new world' because of how
expensive the market is and how hyper extended it is on the very long term, post WW 2 SPX
chart. The implication then was that a fresh uptrend could be starting for the current cyclical
bull market. Well, the market has gone on to new highs in the interim, but, of all things, the
positive cross for the MACD indicator is in virtual stall mode as price momentum has not been
strong enough to push it strongly higher.  SPX Monthly

So, we can give the indicator credit for the recent rally, but I think it is fair to say the jury is
out on sustainable positive price action going forward. You can if you want claim that the
market is on the overbought side currently and when it settles back, more positive action will
ensue and vindicate the monthly MACD. Could be, but I am in no hurry.

SPX Daily -- Overbought Short Term

The cyclical bull market continues despite the recent but doggy two years. The market has
rallied recently to a possible major breakout point, but in doing so has moved up to a short
term overbought position of consequence.  SPX Daily

As with the other rallies we have seen this year, the early phase has taken the SPX up to an
extended position relative to a newly drawn trend line and thus leaves the market with
plenty of room to consolidate or correct in the near term without a clear violation of trend.
Naturally, the chart hardly precludes the market from going higher in the near term, but it
does suggest the train may not entirely clear the station without leaving another entry point
that may be more pleasing to those inclined to add more to long positions.

Holding the Trump bandwagon aside, fundamental cyclical directionals support more gradual
progress, and monthly economic data appear to have firmed although on-the-ground
performance still lags the directional indicators. Investors and traders are also keenly aware
that history favors the Nov. - May period as seasonally positive. As well, the doggy action
in the market since the highs of 2014 is likely whetting some appetites for a strong, positive
breakout.

The Trump buffs are excited about his proposals to cut taxes sharply, establish sizable
upgrades to infrastructure, and allow companies to repatriate foreign held liquid assets.
They have rejected the idea that the negative Trump ideas of new demands on trading
partners, disruptive pursuit of illegal immigrants and a rebuff on climate change will even
see the light of day. These rather selective menu picks may be just right, but other critical
issues are still being ignored such as an economy already near full employment, and budget
deficits that may prove only slightly stimulative if they drain private and public savings as
they are financed.

The next three months will also bring an eye opening experience of the periodic three alarm
dumpster fires that Trump creates as he goes along. We New Yorkers have known him for
nearly 40 years and we can only guess at the chaos he can promote on a world stage.

Stock Market Profile -- Weekly

Fundamentals
Cyclical directional indicators are tracking positive. Excess financial system liquidity is positive
but shrinking owing to faster economic growth and inflation. With the Fed having frozen Its part
of liquidity since late 2014, I favor trading the market and only going long on deep oversolds.
Business profits are beginning to recover but remain under peak 2014 levels.

Technical
The market rose to a new high this week. It is modestly overbought. Watch to see if the MACD
can stage a positive reversal. Note that uptrends now in place have not been tested by any pullback.
The market is a tad over 5% above the highs of 2014. The advance to new highs in 2016 counts
as a flimsy bull episode in my view and awaits more robust positive confirmation.
SPX Weekly

Valuation
The market is clearly overvalued on the various measures I use. Fair value presently lies in a range of
SPX 1990 - 2050.  Currently, the SPX is trading about 9% over the mid-point of the fair value range.
The premium primarily reflects the fact that market players have yet to trim the p/e ratio as they
should when the inflation % accelerates. Folks are now smitten with the presumed economic benefits
of a Trump presidency and the evidence at hand that balanced fund managers and hedgies are
reducing bond exposure in favor of equities.

Sentiment
Bullish sentiment is elevated among advisory services, but is fairly neutral among players who
are actually trading the market via options.

Long Treasury -- At Deep Oversold

In a Jun. 20 post, it was argued that the long Treasury price was "steaming toward an overbought."
And it got there, registering a major intermediate term overbought. Now, there is a flip side, with
the TLT long Treasury ETF having just sold down to a deep intermediate term oversold.
TLT Weekly

Bond price directional fundamentals began turning negative in early 2016. The deterioration has
been mild but persistent. Absent has been the strong production growth and heavier resource
utilization that puts hefty upward pressure on inflation and galvanizes the Fed into tougher
restrictive action. With only nominal cyclical pressure, bond players ignored the warning signs
and bid Treasuries sharply higher into early Jul., ending  the run with what appears as a blow-off.
The market has trended down since, and has recently tumbled as bond traders have come to
believe that Trump's election will involve heavy fiscal stimulus that will accelerate real economic
growth as well as inflation, and will also result in a large increase in deficit federal financing,
with the Fed to follow by pushing short rates higher.

These new concerns could all turn out to be true, but if so, their realization will take considerable
time and may not be strongly evident until 2018 at the earliest. In the interim, questions are bound
to arise about whether the Trumpistas can pull their fiscal program off and whether other initiatives
from The Donald on trade and immigration may work as growth deterrents. This leaves the question
open whether the current stampede out of bonds will overdo it by enough of a margin to produce
an eventual counter-trend rally in a heavily oversold market.

Near term, TLT is moving toward a respectable support level down around 115.

Whatever, bond players might do well to begin to try and factor a volatility premium into
their pricing models to account for an apparent reduction in primary dealer market making
capability as a result of post 2008 financial system regulation.

SPX -- Weekly

Fundamentals
The stock market has tracked my forward looking weekly cyclical fundamental indicator very well
this year. This index has flattened out since Sep. and is in line with the recent toppy action in the
market. Interestingly the economy and corporate profits have seriously under performed the
indicator so that the market has been running well ahead of on-the-ground fundamentals. The latest
rally primarily reflects players buying well on the come in expectation of a Trump / GOP Congress
fiscal stimulus plan presumably to be unveiled early in 2017.

The Fed continues to hint that short rates will be raised soon. A classical cyclical case for a rate
increase is not yet in place, and the Fed has also taken to hinting that rates may be raised to keep
markets from getting too effervescent. With inflation already accelerating and a Trump fiscal
goose to the economy now widely anticipated, the bond market is folding its tents and has shifted
some funds into equities from fixed incomes. With bond yields trending sharply higher near term,
it will be interesting to see if the Fed feels compelled to raise the Fed Funds rate in Dec.

So far, stock players have yet pause to see if there are further assurances from the Trump camp
on stimulus and, if the Congress is willing to go along with the large deficit financing that will
be entailed. GOP conservatives like the tax cut proposals but are indifferent to the infrastructure
plans while the Dems are thumbs down on tax cuts for the wealthy, but like the spending plans.

Equities players will have to watch all this carefully because the industrial side of the economy,
where most of the earnings leverage is, continues to perform poorly. Not only that, but wage
pressure is starting to run well ahead of pricing power, which crimps profit margins. As well,
what if stimulus programs are dinky?

Pauses and / or corrective action in the Trump rally should come as no surprise until matters
are further ironed out.

Technical
For the current uptrend in the SPX to be of substance, the market needs to take out the previous
highs of the past summer in a convincing fashion or else the SPX will face a possibly troublesome
'secondary top.'  SPX Weekly

It is not easy from a technical perspective to have high hopes for the current rally as it comes off
a rather shallow oversold.

Gold Price

The argument here early in the year was that there was a mild cyclical case in support of gold. The
rally that ensued became outrageous and took gold up to a huge overbought and record setting
long side speculative interest by the summer. The metal was fueled by a fast rising oil price, Brexit
and uncertainty concerning the US election. The oil price has weakened since, Brexit has quieted
down as an issue and players have voted for equities over gold since the US election. Looking out
into next year and with the reasonable assumption the US will see fiscally stimulative fiscal policies,
there is still a mildly cyclical positive case for the gold price to rise. Short term, gold may remain
hostage to a seasonally weak oil price and possible US dollar volatility (See third panel of chart up
next)  Gold Price -- Daily

Gold has swung from a big time overbought to a moderate oversold and sits atop a $1200 - 1225
support zone. Since the knife is still falling, and given gold's natural volatility, only heroes will be
stepping up now. More settled players may wait to see if the oil exporters can reach a production
curtailment agreement that is not set ridiculously high before year's end when another painful
seasonal down leg in the oil price is in store. As well, hedge funds like gold as a haven to park
money when the stock market takes a hit. Since there could be slips between cup and lip for
the current equities story, do not turn your back on gold.

The Stock Market As Best As I Can Figure

Back on 10/27, I opined that since the classical conditions for a bear market had not been met, it
was likely premature to write the obituary for the current cyclical bull. The uptrend that was in
place since Feb. of this year was clearly broken by the recent Aug. / Oct. corrective action. and
one could argue that this last leg up through Aug. was the third and final one. But I thought it fair
to wait on that call because it was not underwritten by a clear negative fundamental picture.

The market is now in a seasonally strong period that could last through early spring 2017. Profits
appear to be turning up, and both candidates for the presidency did have fiscal stimulative
measures on their agendas for 2017. Trump's was far larger in scope and with the GOP set to
take the White House plus both sides of the Congress, market players have become re - energized
and have rallied the market strongly from a moderately oversold condition. The SPX bounced up
from its 200 day m/a and awaits further confirmation from a positive reversal of the 25 day m/a.
SPX Daily

We do not know the fate of Trump's stimulus proposals but investors seem willing to bet that
sizable pieces of his tax cut and spending programs will pass, thus buttressing the economy and
profits through next year and into 2018. Sharp upturns in longer dated Treasuries also suggest
fixed income traders agree as they are beginning to factor in higher inflation from faster growth
and increased utilization of capital resources. The roughed out projections for next year also
signal that the Fed is likely to raise short rates to keep inflation in trim. With a larger Treasury
calendar in prospect along with stronger business pricing power, there may also be some rotation
underway from bonds into stocks.

The chart linked to above shows that rapid rises in RSI are often followed by market pullbacks,
and the combination of Trump stimulative measures, should they eventuate, along with probable
Fed tightening may well be a recipe for increased market volatility in the months ahead.

As well, there  could be a substantial timing issue involved regarding Trump stimulus programs.
If he is interested in re - election, fast enactment of tax relief and higher spending issues could
produce an overheating economy before 2020, and leave Trump in a tougher political situation
at that time.

Finally, the US is experiencing social tensions that are running just below the boiling point.
These acute social misgivings should eventually recede, but political miscues in the early
going of the Trump presidency could create further fracturing of of the public's mood that
might affect business and investor confidence.

The Trump We Know....

It's a little disconcerting to realize that The Donald won the Presidency, but was booed when he
showed up in NYC at PS 59 to vote and that he was creamed by NY voters. We are sending him
off to Wash. DC to be enjoyed by all, having failed to keep him to ourselves. So what can you all
expect? Well, right now he is fashioning himself for the office, trying on different guises to see
which one best suits the seemingly limitless ego. Should he play the hard nosed 'America First'
right wing populist, or now that he has captured the office, perhaps he will pose as the firm but
beneficent uniter, pulling those from left and right of center in grand schemes to regain our lost
glory? Or, perhaps he will be a bored protaginist who lets VP Pence and others do all the heavy
lifting.

Figure that whatever, he does not live in your world. You live in his. And figure that the world
is about to become an admittedly very large subsidiary of Trump Inc. A subsidiary who he hopes
he can nurture into a cash cow that can sustain his company and "brand" for posterity. Through it
all, he will do some good and neat things and he will do some very wacky and irresponsible things.
And, remember that even if you live in Podunkistan he will touch your life.

It falls primarily to the US to try and contain and control this guy and it may be necessary for
you, if you are a foreigner, to help out on occasion. Keep in mind also that if you are part of
the shifting and jostling herd that challenges him, hits him as they say, he will hit back hard.

In my years on this earth, I have been genuinely intrigued by few leaders because of their
compelling humanity. They would be Jack and Bobby Kennedy, Dr. King and Barack Obama.
The Donald is more of a case study in egomania and not an engaging person and leader.
I plan to be a mere pale shadow in Trumpworld, and to keep my head down and my
distance.

Wish you all the best.....

SPX -- Daily

The FBI took Hillary off the hook yesterday, and market players showed they were worried about
The Donald via today's rally which suggested Hillary could gain enough momentum to win
Tuesday. Zippy stuff. Now the stock market did correct over the Aug. - Oct. seasonal 'jitters'
period and traders know we are moving into a seasonally strong interval which can last into the
early spring of the succeeding year. So, not only did players affirm hope for a Hillary victory,
they may be using the market's oversold position to get a jump on positive seasonals.

The bounce in the SPX came off the 200 day m/a and was strong enough to wipe out the Trump
dump that had gathered. Well, this all could work out just dandy, but Hillary needs to pocket the
win, and then The Donald and the Trumpkins have to behave and accept the verdict if it supports
that 'awful woman'. The bitterness and rancor of this campaign probably even exceeds the ugliness
some of us old timers saw during the twilight of the Truman presidency, 1950 - 52. Most folks here
think the very hard feelings will continue for some time and  require now vanished statesmanship
to reappear to get a  government in failure mode back on the rails again.

Prudence is a vice in a bull market but a week's worth of intense vigilance may not be fatal.

SPX Daily

SPX -- Daily

Finally, a frisson of fear that The Donald could actually win this thing, or at least create chaotic
post election uncertainty. And, of course, it's Fed policy decision week. So, there was strain in
the market today, and short term 'double bottom" support at 2125 was violated, leaving the market
in corrective mode.  SPX Daily

The chart indicators show a down trending market and an approaching oversold. However,
on a price momentum basis, the SPX is at a very shallow oversold and could fall another 5%
in the very short run before it gets hefty.

The economy has gradually firmed in recent months, thus giving the Fed a little more cover  if
it would like to raise the FFR% another notch. Current indicator benchmark standards are not
up to post WW 2 standards, but are headed, albeit slowly, in that direction.

Trump? The guy is an egomaniac and a demagogue and scares many bright, worldly people.
If he is starting to surge in the closing days of this abysmal election, there could well be
preemptive defensive action that I would not care to guess beyond saying that gold could
have a bounce.

Long Treasury Yield %

The long Treasury yield made an all time historic low in early July, 2016. As discussed since then,
this probably will rank in the very low end of Treasury yields going forward. Yields are being
pushed up by a mild acceleration of inflation which appears headed up to 2.0% yr/yr as well as
by speculation that the world's central banks are tiring of providing super accommodative
monetary policy. More specifically, Fedspeak has been threatening to raise the Fed Funds rate
in the near future.  $TYX

Despite the recent corrective uptrend in yield, the Long Guy has just reached the downtrend line
in place since late 2013 and has only recently crossed its 40 wk. m/a. So, a critical test lies ahead.
Note too, that crosses in yield above or below the 40 wk. m/a tend to be consequential.

The bond price tends to get oversold  for the intermediate term when the 52 wk. rate of change
in yield gets up +20%. I would also note that tougher dealer capital requirements and more
trader interest in this market have made it more volatile, and the rate of change in yield can now
go to plus or minus 40% on a 52 wk. basis. This means yield trend can be very much stronger
than in years gone by.

As a final point, a horizontal line has been set at 3.40% to signify where the long Treasury yield
would have to travel up to to signal that the decades' long bull market in the Long Guy might
be coming to an end. To get there, faster inflation would be in order as would more tightening
by the Fed. 

The Typical Stocks Bear Market

In recent times, the stock market has tended to carve out and extended top before the cyclical
bear arrives. The current cyclical bull has basically gone nowhere for two years. So, it gets
tempting ask whether the market is experiencing one of those periodic, lengthy topping periods
now.  SPX Weekly

It could be so, but the current period does not fit the the typical lead - in. What is missing of
course is the steady rise in short rates along with progressive flattening of the yield curve that
heralds the onset of a pre - recessionary liquidity squeeze / credit crunch. Some elements of a
problem are there. The Fed zeroed out the growth of its balance sheet and the monetary base
quite some time back and even raised the Fed Funds rate a notch last Dec. Moreover, Fedspeak
is leaning in the direction of another increase before long. But the supply of loanable funds now
provided by the private sector has been steadily growing faster than the demands of the real
economy because of low output growth and nominal inflation. Confident investors have drawn
on the excess liquidity to invest in and trade the capital markets. In addition, history shows that
even when the economy perks up, liquidity and the supply of credit can expand along with it
at least up to a point.

So, it would appear premature to write the market's obituary based on the fundamentals since
the traditional cyclical deterioration of the financial system and rate structure is not in evidence.
However, it remains troubling to me that the stock market and the economy have struggled so
obviously since the end of QE 3 as 2014 closed out, and that the economic system has been
saddled with excess business inventory for such a lengthy period.

For now, bond and stock prices are in softening trends as both markets come off the hefty
overbought conditions of the summer. Market players are seeking to find appropriate price
levels to accommodate another short rate increase. There may also be nervousness as the
election fight comes through the home stretch as well as some trepidation about how Trump
will behave in either victory or defeat.

Stock Market -- Fundamentals

The Fed ended its QE programs in late 2014. From a liquidity perspective, the US has experienced
stern tight money since then. I along with a few others warned that both the economy and the stock
market could be damaged following a large, cumulative QE program as occurred in the few other  instances when major QE was halted. From the latter part of 2014, US business sales fell  from
a 7% yr/yr rate of growth down into negative territory by the end of last year and nearly went
into recession before stabilizing. Business sales and profits were also damaged by the oil price bust
which took place over the same period. Since new business orders spiked high in late 2014 / early
2015 just as sales momentum turned down, the economy has carried excess inventories ever since.
Super low shorter term interest rates make it easier to carry inventories, so the holding of large
stocks has continued to suppress economic demand. Over this period, SPX net per share has fallen
from about $115 to $98 in 2016. Overall, the economy did not fare that badly, as the Fed wisely
kept interest rates at historic lows.

The stock market did better than profits since late 2014. The SPX is currently about 2.4% higher now
thanks to a premium dividend yield compared to short rates and Treasuries and exceptional investor
and trader confidence.

Looking out a year, most players are mildly bullish, expecting the SPX to grind modestly higher on
a positive bounce in earnings sufficient to overcome worries about upticks to inflation and short
rates.

This is a risky environment. There is no liquidity tailwind from the Fed. To avoid a sharp economic
contraction and deeper weakness in profits, excess inventories will need to be worked off slowly.
Such measured inventory policies rarely happen. Inflation will need to be modest enough not to
pressure household incomes too much. Finally, the post - election period will have to yield promise
of either fresh fiscal stimulus or the introduction of a new avenue of monetary easing to assure a
degree of economic rebound. 

It is not easy to thread a needle.

SPX Weekly

SPX, Long Treasury, Oil Price -- All Quickies

SPX
The fairly strong overbought of Jul. - Aug. has been wiped as the market continues to exhibit mild
corrective action. The uptrend line in force since Feb. of this year has been broken and this remains
a source of concern as is the negative controlling force of the 25 day m/a. The SPX has however
notched a double bottom this week and it remains to be seen whether it can rally more forcefully
off that 2125 level or whether further ground may be lost. Quick little swings in sentiment concerning
monetary policy for the remainder of 2016 appear to dominate the action.  SPX Daily

My proxy for US business sales through Sep. rose a paltry 0.5% though pressure on earnings may be
subsiding as weakness in oil / gas comparisons should continue to grow more shallow. Output from
the mining / extraction / minerals sector was down a sizable 9.4% yr/yr despite modest improvement
in recent months, but pricing in this sector is less awful.

Capacity utilization in the US. is only 75.4%, unheard of in the modern era for an economy that has
been expanding for seven years and the data has to be unnerving to the Fed.

Long Treasury Yield ($TYX)
The long T-bond yield has swung up since early July probably mainly on talk of eventual Fed
tightening. Note as well that the yr/yr % change in CPI inflation has continued to inch ahead with
Sep. standing at 1.5%. Under the most charitable conditions, the long term yield premium spread
of the Treas. vs the CPI would dictate a 3.5% T-bond yield presently. Continued very low real
growth of the economy and large capacity slack has been keeping the yield near historically
low levels.  $TYX Weekly

The long Treasury was very overbought in early July and this position has eased very substantially
in recent months. Thus despite the talk of further monetary tightening and the slow push on
inflation, some traders may play on the long side and it will be informative to see if they push the
bond down enough to reverse its uptrend.

The bottom panel of chart shows the relative strength of the stock market vs the long Treasury.
Note that since QE 3 ended as 2104 ran out, The bond has done about as well as the stock market
on a price basis as bond players correctly gauged that elimination of QE programs would suppress
economic growth and that the blowout in the oil price would contain inflation.

Oil Price
With peak seasonal driving for the year having past, oil has entered a period when the price can
be seasonally very weak right into early Feb. of the succeeding year. Net oil producers could
well hit another period when oil revenue inflows tumble unless they can convince the market
that a strong agreement to limit future oil output can be hammered out. Failing that, WTIC
crude could zip down from around the $50 bl. level right along to $35 - 40 by early this coming
Feb.  $WTIC Crude 

Note that oil has held its uptrend since Feb. of this year. So the test of producer credibility lies
dead ahead. A tumble in the price would further devastate the finances of net producers, probably
bother the SPX and could give the market for top quality bonds another reprieve.

SPX -- Daily

The stock market ended the latest upward thrust in Aug., when it became overbought on both short
and intermediate term bases. Weakness since the outset of Sep. could be attributable to a work off
of the overbought condition, but extension of a dip here in Oct. sees the market entering more
perilous territory. The indicators have weakened; the SPX has had trouble breaking through a
falling 25 day m/a; the uptrend line in place since Feb. has been violated. Thus, we have red flags.
SPX Daily

Bad enough the Fed has been keeping up the hawkish patter on the outlook for short rates. Now
a broad range of fundamental issues have increased player anxieties including the Deutshebank
meltdown, new worries about how troublesome Brexit may become, concerns over earnings, and
the sudden fractures within the GOP just a few weeks ahead of the elections. The latter represents
a rare disruption for the idea of a stable two party system, and with The Donald talking nasty
in the wake of his recent "grab them by the pussy" video, freakish debate performance, and GOP
desertions, the party, long a bulwark of US political life, appears in crisis. A novel uncertainty has
presented itself. All of this has come to pass during the latter stage of a jittery seasonal period.

The market is slightly oversold. For the SPX, there is important short term support at 2125. Breaks
of trend are not to taken lightly. Consider also the NYSE a/d line which shows vulnerability as well.
NYAD Daily

Gold Price

Back on Jul. 10, the argument here was that the price of gold had hit an intermediate term overbought
on record speculative interest in the futures market. Despite the glaring technicals, the price held up
reasonably well until the last several weeks when market sentiment, observing a firming of the USD,
began to deteriorate as players encountered a fresh round of Fedspeak concerning the readiness of
the FOMC to raise short term rates before long (Dec. probably). The fundamentals remain ever so
mildly positive, but the gold price had so wildly over discounted them that a fast negative reversal
in gold's fortunes has rapidly ensued. Gold Price -- Weekly.

The sharp sell down in gold has eliminated the overbought position and the heavy premium to its 40
wk. m/a. Speculative long positions in the futures market are rapidly evaporating but still remain
elevated. The fundamentals ex. the USD have firmed up a bit more with a recovering oil price
leading the way. The dollar still has some short term upside before it hits an intermediate term resistance level. With plenty of chatter out there about the world's major central banks experiencing easing fatigue and a very unsettled UK pound market, it may be necessary to give the gold price a degree of downside leeway to important support at $1200 oz. In addition, since the recent price weakness in gold broke a nice uptrend line running back to late last year, there may be further, belated downside action in gold.

Going forward, it still pays to watch the US economy and whether further expansion is strong
enough to support a mild acceleration of inflation. True, short rates may rise gently further in
such a situation, but there is no guarantee whatsoever that the USD will follow rates higher.
If so, that may give gold another shot at redemption. And, who knows, if Der Trumpy wins
the election the gold guys might like that.

SPX Monthly -- Brave New World

I have long had substantial respect for the monthly SPX chart, especially the MACD indicator.
Crosses in this measure have proven to be useful guides to future results for the market because
whipsaws have been few and far between. Monthly MACD is in the second panel of the chart:
SPX Monthly

The negative cross in early 2015 tipped off well the 15%+ decline that followed late last year and
carried into early 2016. Now there is a positive cross which confirmed the rally to new highs just
a short while back. The SPX reached an intermediate term overbought this summer, but if the
monthly MACD is taken at face value given its history, the market should trend higher for a period
of months going forward.

Looking from a reasonable perspective, how could this happen? Well, there could be a trend
extension continuation pattern based on the assumption the economy evades recession but does
not grow rapidly enough to foster a significant rise of inflation and a sustainable upturn in short
rates. Or it could be the result of a stronger economy and rebounding profits sufficient enough to
offset the hit to the p/e ratio from a program of gradually rising short rates and somewhat higher
inflation coupled with a degree of rotation out of bonds into stocks. The latter case would signal
the economic expansion was moving into a more mature phase when stocks can certainly rise.

The secondary fundamental indicators I use for the market have cleanly supported the rise of
the SPX since early this year, but implicit economic performance has fallen enough below par to
warrant caution in making either market or economic predictions for the year ahead.

There is growing chatter in the financial press that a Trump election victory could lead to a price
correction in stocks of 10% because it would represent, speaking euphemistically, a wild card.
But if the consensus of market players continues to support a Clinton victory, we could almost
as easily see a pull back on the premise of 'buy the rumor, sell the fact' as players focus in more
carefully on what a Clinton victory might really mean for the economy.

There is an old New Yorker admonition for times like these: Don't be no hero.

Stock Market

Fundamentals
The cyclical bull market that started in early 2009 remains in place. But, it is an uncomfortable time.
My forward looking weekly cyclical indicator has been nicely on the rise since Feb. '16, in line with
the current up leg of the market, but the customary positive follow through for the economy and
for profits suggested by the indicator has fallen far short, leaving the market to advance primarily
on a nominally rising dividend, yield premium to cash equivalent and Treasuries, and a very low
inflation rate. Players call this "TINA", short for "there is no alternative". The idea is that with the
Fed holding interest rates so low, there is not enough competition for stocks. So far since the
latest leg up started in Feb., the premium p/e ratio, hyper extended position of the current price
level, and stagnant earnings have increased anxiety but have not knocked the SPX off of its uptrend.

With Fed members talking about raising short rates before long, the rally has lost positive
momentum and players are also wondering about the outcome of the upcoming election as well.
Since my forward looking economic indicators are not working very well at this point, I am not
about to step out of character and start making market predictions. When some useful clues come
around, I'll reassess. The stock market does not owe us a thing at this point, but I hope the economy
owes us some stronger performance.

Technical
The SPX continues to work off the overbought levels hit this summer and the indicators show mild
deterioration.  SPX Weekly

Oil Market / Price

Sep. is one of the strongest months for the oil price on a seasonal basis. The rally fizzled again this
this year, with large speculators exiting trades. The scenario I have followed called for oil demand
and supply to come into balance by the end of 2017, despite likely outsized inventories. With a
slower pace of global economic growth so far in 2016, oil demand is running below initial
expectations, and with supply still growing at a high rate, the inventory pipeline is susceptible
to filling further. With a nod from the Saudis, talk is now swirling around the idea of some kind
of global production ceiling if not a cut. It could happen, but 50 years of history teaches to be
careful of this kind of talk in the wake of major price busts.

I played the long side of oil over the winter / spring of this year but have been suspicious since
mainly because of the near historic long side speculative interest in the crude future. Heavy long
side interest is subsiding quickly now, but it is back to the drawing board for me as there are
question marks concerning both global supply and demand looking out 12 months. Since the big
traders and hedgers in the market get more intelligence faster than the rest of us, one rule of
successful trading in oil comes to the fore: Oil is volatile, so do not bother trying to catch tops
or bottoms, but concentrate your research when trend develops instead. Whipsaws happen, but
since oil tends to trend, spotting change can be profitable even after its price direction has
begun to establish itself.

With the peak driving season in the northern hemisphere now wrapped up, oil is set to enter a
strong price downtrend on a seasonal basis.Thus, the large swirl of talk about limiting output as
another sharp downturn in price would add to the severe economic damage net oil producers
have already sustained. Stay focused on the news.

WTIC Weekly

SPX -- Daily

With a sharp, short time duration sell off early in the month followed by a fast double bottom
just above the SPX 2125 level, the market is attempting to rally off a moderate price momentum
oversold condition. A rise in short rates has been pushed further out in time, so stocks and bonds
have some breathing room to the upside. If you are long the stock market, next you will want to
see if any further progress is sufficient to reverse the downtrends in SPX RSI and MACD.
SPX Daily