SPX -- Monthly

The argument here since last autumn has been that the end of the huge Fed QE 3 tailwind to
the economy  and the stock market would involve  penalties for both. So far, resulting economic
and market difficulties have not been major. The US economy slowed down as expected, and
deceleration of progress was made worse by severe winter weather and labor difficulty work
stoppages. With the Fed having frozen its balance sheet, financial system monetary liquidity  
growth is slowing markedly,  and the economy is becoming far more reliant on internally
generated cash flows and private sector credit growth to fund further progress. Transitions of
this sort have occurred frequently and successfully throughout US history but they can be very
difficult during those times when the economy and confidence have been heavily dependent on
large liquidity support. In turn, the SPX has lost its positive momentum and is trading on a par
with its highs seen last Nov.

My weekly leading economic indicators have recovered and suggest a mild rebound for the
economy during the second half of 2015. When measured yr/yr, business sales and earnings
should also improve modestly. As for the stock market, my "easy money buy signal", in
force since very early 2009, will likely end late in 2015 if the Fed starts to raise short term
rates as is now widely expected.

Speaking as a funds manager and not a retiree, when the "easy money buy" comes to an end,
it would be time for me to acknowledge increased cyclical fundamental risk and reduce exposure
to stocks.

No buy signal does not imply a market top but it does say to me that it is time to
activate strategy and tactics to reduce exposure to stocks because the secondary indicators I
use during these periods are far less reliable than the primary ones and because fundamental
risk will likely rise further. I should note that a goodly number of fund managers would not
agree with this approach, finding it too conservative.

I have added a link for the SPX Monthly Chart. It shows the SPX to be down on its 10 month
m/a, RSI and price momentum in downtrends, and most disquieting, a roll over to the down-
side for MACD. It may be too early to consider that roll - down in MACD a kiss of death.
The reason is that  the economic expansion does not yet exhibit the maturity in terms of
resource and capital utilization that would prompt such a perspective.