Stock Market / Economy #3

My argument is recent weeks is that The economy is well due to show stronger economic
data lest the rally in the market turns into just an eventually hollow play on the Fed's QE 4
program. Well economic activity data from US purchasing managers in recent days shows
a firming up in both manufacturing and services including especially new orders. On a
combined, unweighted basis, my US new orders index jumped to 57.0 in Feb. This is a
healthy reading and the strongest since Feb. 2012. Now, reflecting the timing of QE
movements by the Fed, the economy has tended to be strongest in the 4th Q / 1st Q
sequence periods of this recovery. Q4 '12 was a dud in view of the extended tardiness of
Fed liquidity policy implementation, so it was important to see some positive flow through
here in early 2013 in response to QE 4. I also liked the snapback in new orders for
non-defense capital goods which was recently reported.

Now, it may well be the economy will lose some positive momentum as it moves into Q 2
'13, but it was important to see the reaction to QE 4 and to realize that Bernanke intends to
stay with it in the months just ahead.

Based on today's strong positive action, the SPX has started to edge away from seeing the
indicators roll over to signal a correction. But, it is an overbought and extended market
and must build energetically off today's lift to develop a clear positive whipsaw that will
shamelessly rout the shorts. SPX