Stock Market -- Daily Chart

On a seasonal basis, the market is behaving perfectly -- flattish, with low volatility and light
volume. SPX Daily Chart It's August in the Hamptons and the living has been easy.

The sharp advance underway since mid - Nov. '12 is still underway, although the SPX is
failing to sustain the momentum or speed line of the original impulse that ran into May.
The market is not overbought in the short run, but it does remain relatively strongly
overbought against its 200 day m/a. So far, investors have waived off this significant
intermediate term caution. Attached short term RSI and MACD are trending down,
but the market does not show breakdowns of the 10 and 25 day m/a's which would signal
a likely, more noteworthy move down. The VIX remains very subdued and indicates a
strongly confident tone to the market. On balance, it has been very hard to scare players
off the market so far this year.

Seasonally, the stock market does tend to give up some ground ahead in Sep. and Oct.
There is already a surfeit of "crash talk" out there on the Web as guys try to make the
big call via capitalization on the 1929 and 1987 Oct. crashes. There are also folks who
have moved into crash debunk mode. Some of it on both sides makes for interesting
idle time beach reading on vacation.

There is a serious element here, however. Historically market panics such as the US
experienced in 2008 - 2009  can beget an add -  on panic / recession a few years out
provided that the steep loss of confidence the initial panic caused hasn't been broadly rebuilt
and providing that near concerns develop regarding liquidity in the system. Post 2008,
the Fed's QE programs and ZIRP policy have been in place to keep the wolf away from
the door, and system liquidity levels are probably adequate to keep the wolf at bay so
long as the Fed does not behave foolishly and cavalierly in the months ahead regarding
any prospective firming up of monetary policy. In a like manner, the administration
and the Congress will be squaring off on the budget and the debt ceiling later in the
year and we can hope but not genuinely expect that no further damage to this modest
economic recovery will be done via foolish fiscal policy choices.