Stock Market Factors

The "Factors" update offers some quick perspective on the market in terms of risk /
return. Stock Market Factors

SPX Panel
The Cyclical bull rolls along. The strong price action this week re-introduces a mild
overbought on short term price momentum and brings the SPX to a major overbought
when seen against its 200 day m/a. The % premium here is presently 10.2. Now the
premium can go higher than 10%, but this has happened rarely and the odds the market
will perform strongly after the SPX does clear the 10% level are only about 25% within
a rough six month time frame. So, it is not a bad time to take stock of your objectives
and, if you are a more balanced trader, keep an eye out for shorting opportunities.

VIX Panel
As the bull market has advanced since the autumn of 2011, volatility expectation has sunk
and investor confidence has risen. The VIX is currently at 12.2. A very low VIX of 10.0
would indicate that market players are not just confident, but are smugly so as back in 2007
before the trouble started. So, the bulls do not yet think they have it nailed but they have it
going in that direction. The VIX can stay low for goodly periods so the trick remains to
look for the sudden upturns that may well warn.

Relative Strength Of The Cyclicals Panel
When the cyclicals outperform, investors are looking for improved profits as the cyclical
companies have the earnings leverage in an economic expansion. The cyclicals relative
strength index has lost its uptrend recently and has been flattish since the end of Jan. Players
have been adding more defensive holdings while staying in the market with the Fed's QE
program operating as the tailwind. I would prefer to see the cyclicals adding to relative
strength.

SPX Vs. Long Treasury
The relative strength of the SPX has edged above resistance, but you can see that some
players are sticking with Treasuries on the basis of an economy that has recently slowed.
This week has brought some resurgence back to stocks, but a failure of stocks to continue to
to outperform the very low yielding Treasury bond would not be a good sign.