Stock Market -- Daily Chart

The latest leg of the bull advance has been underway since latter Nov. 2012. SPX Daily
The market could not hold the 11/12 - 6/13 speed line and a fairly tight up channel has
given way to a milder and more volatile advance, but the broad trend is intact. The
current, still minor corrective action of the SPX is from a short term overbought position
and if the more volatile price action remains in force, the SPX could drop further into the
low 1650s area without wrecking the new up leg underway since later in Jun.

The moderation in basic trend and the step up in volatility plainly reflect the introduction
of sterner talk from the Fed about eventually curtailing the large QE3 program. The FOMC
did extend the QE thrust at its Sep. meeting, but some Board members continue the rounds
of harping about its eventual curtailment before many moons have passed.

The US fiscal policy / debt ceiling circus is well underway and there is an obvious stronger
level of mutual contempt between Obama and his allies in the Congress and the GOP right
wing. The ugliness on display is welling up fast and it now seems like there may be a
stunning crescendo of invective yet to come. I do not think investors have taken the show at all
seriously so far, as more zigs and zags in debate and tactics likely remain ahead. If there is
a battle over the debt ceiling which seems headed straight for the eleventh hour, there could
be nasty reactions in the bond and stock markets that come suddenly and late in the game.