Stock Market -- Near Term

The rally in force since the spring tested important support last week and remains intact.
It continues impressive in breadth but not so in volume. Momentum in the popular major averages like the S&P 500 is subpar, mainly because there is continuing rotation into
mid and smaller cap. stocks. Fittingly, I do not have the large cap. indices as short term
overbought, but the broader NYSE Adv / Dec line is.

The S&P 500 is falling behind the course for a normal cyclical bull, partly reflecting monetary liquidity restraint but more so because of rotation toward smaller stocks.

My Basic Trend Index (NYSE A / D line adjusted by daily TRIN)remains in an uptrend and
is not yet overbought because TRIN readings have not been that low.

I have the S&P 500 as exactly fairly valued given the prevailing inflation and earnings levels.

The S&P 500 is trading at a modest 10% premium to my dividend discount model (Premiums or
discounts to the DDM of 25% or more require much greater due diligence).

My monetary liquidity trackers suggest the Fed is still tightening, which increases fundamental earnings risk in the market and keeps me with occasional, light exposure to
the long side.

Market risk is higher than that indicated by my work on monetary liquidity for two reasons:

> Oil and natural gas prices may be seasonally elevated, but the sharp long term uptrends
remain in force (inflation potential);

> Continuing rotation into higher p/e smaller caps puts many portfolios at greater risk if a correction ensues for valuation and market liquidity reasons.

I AM STILL HAVING TROUBLE WITH WINDOWS, SO POSTS WILL REMAIN EDITORIALLY PRIMITIVE FOR A
WHILE LONGER.