Stock Market -- Technical

On the basis of trends, the market is obviously positive.
It is also short term overbought and extended. Moreover,
the longer term momentum work I do suggests an extended
market in the sense that investors and traders have been
unwilling to keep pushing shares up with the market at its
recent premium to the 40 week M/A during the upcycle underway since
late 2002. There have been periods in the past, especially
during the raucous 1990s, when no such discipline was observed
and the market went to very large premiums to the underlying
trend. But this cycle has shown far more constraint and
discipline.

It is also interesting to note that May is becoming an "iffy"
month seasonally. Longer term, May exhibits seasonal strength
that builds on April, but in recent years, May has triggered
some aggressive selling as some players like to exit the market
in the spring with an eye to re-entry in the autumn.

It has been my view that the market entered a topping process a
short while back. So far, that view has proved incorrect as the
market has pushed to new cyclical highs without breaking a sweat.
I have hesitated to make a 2007 forecast of the market based on
fundamentals, and perhaps I should have buttoned my lip on the
technicals as well. From my perspective, the suggestion will have
proven a big disappointment without a solid 5-6% sell-off in the
next couple of months.