Stock Market -- Weekly

Technical
As indicated in the 5/30 SPX weekly (scroll down) the market has broken out of a congestion
zone to new highs. The breakout extended this week with the SPX closing in on the channel
top in place since autumn 2011. SPX Weekly The MACD, though historically in an upper
register, has turned positive to confirm the breakout. You have to go back to the late 1990s
bubble years to find a weekly MACD reading which has remained so continuously highly
elevated. The market is also 7.5% above the 40 wk m/a and is inching up to another strong
overbought reading. Historically, buying into these sorts of elevated momentum and MACD
markets works out profitably only about 25% of the time, but investors have made it pay
nicely since the spring of last year when the market was propelled up to high levels on these
important measures. (In the interim, more conservative traders like me have been left out in
the cold.) The RSI is overbought, but the chart shows how an overbought reading can last
several weeks especially when price momentum hums along.

The VIX index shows new levels of confidence and complacency were reached this week,
and may be its time to take note of this even granting that a low VIX reading can continue for
a good several weeks running.

Price momentum is o.k. and market breadth is solid. Volume remains awful and this may well
bother players considerably more if prices continue to trend higher on light volume.

Fundamentals
Purchasing manager combined data for new orders have been positive throughout the recovery
but showed a trend of deteriorating momentum from late 2010 through mid - 2013. Save for
the recent winter (Jan. / Feb.), combined new order data has been relatively strong since mid -
2013 and weekly leading economic indicator data remain in an 18 month uptrend. Moreover,
banks have been lending in support of higher working capital needs. Investor focus has
meanwhile shifted from the Fed's QE program which is now winding down to the better
business fundamentals. Earnings estimates are inching up after months when estimates were
consistently cut and this has helped stocks recently.

With QE tapering substantial and ongoing and business data at the forefront again, investors
should be become increasingly sensitive to how well the economy is doing. This is a big
change from last year when mounting monetary liquidity was the dominant theme, and players
were very much more tolerant of slips in economic momentum.