Stock Market -- Shorter Term

As discussed in the 8/4 post on the weekly chart, the SPX at 1710 was once again fully
extended on a price basis just as it was in May. Since then, the market has fallen into a
short term downtrend that was recently confirmed by negative rollovers in the 10 and 25
day m/a's. Viewed strictly short term, the SPX has moved from a mild overbought up at
1710 down to a mild but deepening oversold. SPX Daily There is short term trend support
for the SPX down in the 1630 - 1640 area.

From a purely technical perspective, I do not have a strong point of view regarding the
direction of the stock market in the weeks just ahead.

I am surely not the best guy to listen to this year on the stock market as I have thought
that SPX 1550 represented a decent top for the year on both fundamental and technical
grounds. I have been concerned however, that the guys would use the QE elixir to drive
the market higher even though the underlying business sales and earnings fundamentals
did not warrant the drive. They have done so.

Presently there are concerns in the market about the future of QE and the widely discussed
eventual cut back in the growth of this program. And this is now coupled with questions and
debate about the current strength of the economy. So, players see more risk in equities for
the time being and we are witnessing profit taking and some effort to replenish cash kitties.
For my part, the weekly leading economic indicators have turned more positive but are not
showing anywhere near the zip needed yet to support rosy earnings estimates for the final
quarter of this year and especially for 2014. Moreover, I flat do not think there is a case
for curtailing the Fed's QE program in the months ahead without a switchover to a sizable
fiscal stimulus program to backstop a sluggish economy, and for what it is worth, I doubt
Bernanke does either.

Right now there is a swirl of competing forecasts, predictions and expectations about the
likely courses for the economy that is too rife with varied assumptions to capture my interest.
Ditto the bond market where there has been a case for a very gentle upturn in yields but
nothing in support for the strong reaction well underway.

August on the sidelines has been very pleasant for me.