Stock Market Comment

In the immediate aftermath of the election, official Washington is abuzz about restoring
fiscal integrity and resolving the cliff (1/1/13 expiration of tax cuts and mandated spending
cuts). Business leaders are clamoring for a budget deficit reduction accord so they can
run their business plans more effectively. However, any fix worthy of the name will do
damage to the real economy.

Monthly new order rates through Oct. in the US are trending up but suggest modest growth.
The global situation is more precarious, with nominal growth indicated but butttressed by
the US. My weekly forward looking economic indicators rose from Jun. - early Oct. but
have now eased down and may well continue under modest pressure over the next few
weeks. No hint yet of a more serious erosion in the outlook.

From a pragmatic political point of view, now is a good time to secure some revenue
increases and cut fiscal spending in selected areas since there will not be another election
until Nov. 2014, two years hence.

With Washington now newly reverential toward reaching a budget deal in a fragile global
economy, one can easily understand an extension of the correction in the stock market. And,
to add worry to woe, the EZ is showing economic slippage again (Germany) while here at
home, the Federal Reserve has yet to move on QE 3 with any brio or consistency.

The Fed needs to get moving on QE 3. Obama and the Congress need to signal fast that any
budget accord will kick in proressively with only mild penalties for growth next year to
avoid damaging consumer and business fundamentals and confidence. The EZ? Well, I
will return to that later in the week.

I include the daily SPX chart with the post. SPX The downtrend is clear and confirmed by
the indicators. The market is not substantially oversold, but is at a level that may prove
tempting to a range of short term traders.