Stock Market Factors

Here is an update on the "quickie" guide to the stock Market. Stock Market Factors

SPX Panel
I did not expect the fast 100 point run up in the SPX recently. This move took the SPX
up to a 12% premium to the 200 day m/a in May. The odds for that kind of strong move
are about 1 in 4. The sell off since the 5/21 all time high still leaves the SPX overbought
against the 200 day m/a, but has eliminated the short term momentum overbought.

The VIX Panel
The downtrend in the VIX ratio since the late summer - early autumn of 2011 may have
ended, although it is early to tell for sure. The very mild recent bump in the VIX signals
only a modest loss of bullish confidence, but a continued move up and over the 20 level
would signal something more serious may be at hand.

The VIX will occasionally rise along with the market when players are extending long
positions but are starting to worry that they are witnessing a strongly speculative move.
We have not seen that so far as the market's p/e ratio has not lifted far enough to trigger
that sort of anxiety.

The Relative Strength Of Cyclicals
Since the start of 2012, the cyclicals have been unable to top the .75 level in relative
strength as the loss of earnings growth momentum and extended flattening of SPX net
per share have substantially tempered interest in the group. The panel also shows that
the uptrend in the RS of cyclicals that started in Aug. 2012 has run out of gas recently as
investors and traders again begin to reassess the outlook for profits. This development
is hardly fatal, but more care is required when a less aggressive, more defensive rotation
may be in store.

Stocks Vs. The Long Treasury
The broad market has substantially outperformed the Long - T since mid - 2012 when the
Fed re-introduced QE, first as concept, then as program. The fundamentals in favor of
higher Treasury yields (and lower prices) have eroded over the past two months as US
industrial production and sensitive materials have flattened out. Even so, evident rotation
from bonds to stocks has continued. It is a little odd that bond players have been less
sensitive than normal to signs of sluggish industry output.