US Stock Market

Technical
The cyclical bull market continues. The strong showing this past week eradicates the shorter term
secondary top thesis. The market is in a confirmed short term uptrend and is supported by the
trend of my primary indicator (breadth + unweighted pricing). The one caveat I have short run is
that my NYSE weekly buying pressure indicator, although rising, is slightly short of a new cyclical
high. The $SPX is just edging into moderate overbought territory at 2.6% over the 25 day m/a. So
far this year, players have been reluctant to push the 25 day oscillator above 2.6%. If the new run
up is to be a strong one, we could expect to see the $SPX move up to close to 5.0% above the 25
day m/a.

The $SPX is running about 11.8% above its 200 day m/a. This need not be a worry, but it is a
reminder that new longs are being put on in a market that is overbought looking out beyond the
short run and one which is being chased up. $SPX chart

Fundamentals
Core fundamentals continue positive, although some modest slippage is showing up in bond
yield quality spreads. Come 6/30, my primary liquidity indicators will start to decay if the Fed
keeps its word and does not offer a QE 3 program of some sort.

My weekly fundamental coincident cyclical indicator has been eroding since its 4/8 cyclical
peak and has broken down below trend in place since the end of Aug. 2010. This developing
sizable negative divergence to the "500" might be explained by the popular idea that the 2nd Q '11
will see a rebound in economic activity as Q1 weather related lost output is made up. Could
well be, but such should be showing up in the weekly indicator. I would note also that the
Treasury yield curve is shifting down as well as fixed income players anticipate a slower
economy.