SPX -- Monthly Chart

Today closes out Sep. 2013, so I thought I would take a look at the monthly chart.

Technical
This is a cyclical bull market which has carried the SPX to a new all time high recently. The
market is extended on a cyclical basis off the 3/09 low and is also very extended within a
long term band that carries back to the end of WW 2. It can definitely go higher but once the
SPX rises above the 1700 - 1750 into hyper - extended territory, history strongly suggests the
market could be bought considerably more cheaply within the next five years. SPX Monthly

Note also how extended the monthly readings for MACD, RSI and Williams %R are getting.
Note as well how far above these indicators are from excellent possible buy points. From a
technical perspective, this is a well advanced bull market, which if it continues to move
higher without a substantial breather, is going to force participating investors to accept sharply
higher long run risk.

Fundamentals
Now we get to the fascinating part. Tops in the market coincide with economic expansions
with elevated cycle pressure measures and high rates of resource utilization. At these points,
broad money / credit growth is normally at +10% yr/yr or higher and short term interest rates
are at least 5% and in uptrend mode to counter a credit supply / demand pressure gauge that
is running at strong positive levels in favor of demand. Finally, inflation is in cyclical
acceleration mode. The current US economy still has ample resources to grow, moderate
cycle pressure gauge readings, only 6% funding growth, a low credit supply / demand
pressure gauge of a mere +1.4, a ZIRP on short term interest rates and very low inflation.

So, the stock market is rather fully extended, but the economy is not. There is slack to
support economic expansion for a good several more years.

What we do not know is whether the economy can realize its expansion potential without
continued substantial quantitative easing from the Fed. This epoch is not like any time
since WW 2. Stocks wise, it matches up with 1932 - 36. The market crashed in 1937 when
the Fed removed QE and allowed a slight rise of interest rates. the analogy has 2014 match-
ing up with 1937 and there could be trouble if the Fed tapers down QE to zero next year
and consumers, businesses and bankers lack the confidence to transition the economy to
self - sustaining expansion.