SPX -- Weekly

Fundamentals
Economic and profits indicators are positive. % momentum of growth of Fed's balance sheet
and monetary base are set to decay following strong positive upswings through 2013. Plan for
rapidity of decay in momentum will likely be unveiled over next few FOMC meetings and
could negatively affect the SPX's elevated p/e multiple in the weeks ahead as some investors
have been riding the surge of QE since late 2012. This is a logical but not a sure bet. Exposures
to emerging markets have been reduced as some players are concerned about a diminution in the growth of liquidity on a global basis. The curbing of the Fed's QE 3 program represents a
tightening of monetary policy and reactions in the markets should be expected. Within US
monetary policy, QE tapering is a novel development and its full impact on the markets and
the economy will require keen observation rather than economic theory dogma.


Technical
The SPX is turning down in the short term. Interestingly, declines in the premium of the SPX
to its 40 wk. m/a last year were all halted around the +5% level give or take a few basis points.
The erosion of the SPX so far this year has brought the market right down to that level. Further
weakness in the SPX ahead would violate the powerful performance trend of 2013 and could
well signal a less positive change in the market dynamic. The 'buy the dip' play in 2013 had
a clear pattern to it and it is about to be tested.


SPX Weekly