Stock Market

The market oversold has deepened. The SP500 remains at a
nice discount to its 25 day m/a, and my six week selling
pressure and buying pressure gauges are in deep oversold
territory. So, a tradable rally may not be far off. I would
also note that there are two distinct 20 week cycles and
one nine monther that point to lows within the next 30 days.

That's the good news. The bad news is that the SP500 Market
Tracker is coming down fast reflecting both earnings estimate
cuts and pressure on the p/e multiple from accelerating
inflation. The Tracker is undergoing its sharpest decline
since early 2001, falling from a July 'fair value" estimate
high of 1610 to just slightly below 1500. Analysts are cutting
Q4 '07 estimates and are just starting to trim Q1 '08 numbers
as well. The weekly leading economic indicators have stopped
falling however, but are flattish and suggest slow or "drag
ass" growth. The inflation thrust indicator remains in a
substantial uptrend, pushed hard by the oil price and, more
lately, a recovery in the retail gasoline price. The momentum
of inflation thrust has slowed a little bit over the past ten
days. You have to respect all of this, but not get carried
away with it as there are at least short term indications the
economy is stabilizing. There is no end of print about the
problems of the financials, but the banking sector is
functioning -- loans are ticking up and funding is not unduly
constrained. Loan losses are rising, but cash flow for this
sector has mushroomed to $150 billion annually in recent years.

Visibility to sustain the cyclical bull market is low now, but
my indicators do not yet suggest throwing in the towel.

I plan to give discussion of the stock market a rest for a couple
of weeks and look at some other topics. I include a link to the
weekly SP500 chart.