Stock Market -- Weekly

Fundamental
The key driver for the continuing advance is the Fed's ongoing large QE program. It has
fostered broad liquidity growth in excess of the needs of a muted real economy, and with
slight progress in corporate earnings, provides a strong tailwind for investor confidence.
Some investors believe the economy is set to accelerate and some are very happy with
very slow economic growth and low inflation and interest rates. Weekly cyclical data
I follow show some recent firming for the economy, but this index has been flat since Feb.
and must strengthen considerably to support the economic growth acceleration case.

The SPX is up about 54% from the 3Q 2011 when this latest extended up leg began.
Over the same period, SPX quarterly net per share earning power has expanded but 7%.
The p/e ratio has risen by nearly 50% leaving the SPX fully valued for now. Few wish to
fight the Fed.

Technical
The SPX remains in a strong uptrend. It is again getting extended in price as it was just
back in May. The RSI and MACD show rising trends from the 2011 low with the MACD
now very overbought on the weekly chart. Notice the recent and not often seen whipsaw
in the MACD, signaling strong player desire to add to positions on dips. The market
remains at a hefty premium to its 40 wk. m/a as well. SPX Weekly

The VIX volatility index -- a barometer of fear vs. confidence -- has dropped down to a
level just a hair above the 10 line which demarcates strong confidence and supreme
complacency (bottom panel).

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The continuing expansion of the p/e ratio marks the passage of the SPX from value driven
to price momentum speculation. Keep your quote device nearby as the fast action guys are
arriving in trucks.