SPX -- Daliy

With a weak market failing to hold support at SPX 2000, it has entered breakaway down mode
and is headed to major support in the 1870 - 1875 area. Theoretically, a break below this latter
level would open the SPX to a much steeper fall. SPX Daily

Folks will be watching 1875 support very carefully. And not just bears. If the market falls to this
level soon, it will be heavily oversold, and if the SPX holds around this level, there could be a
strong rally comparable to what was seen back in Sept.

There has been much chatter about China, but I think the main issues for the US market concern
the steady loss of economic growth momentum since mid - 2014, a blow out in the oil price,
the resulting trend of steadily weakening of earnings and the fact that despite this deterioration of
fundamentals, the Fed has chosen to begin the process of "normalizing" monetary policy by
raising short rates up from the zero bound. More broadly, the absence of the large QE 3 tailwind
has undermined investor confidence, with more players perhaps unwilling to capitalize net
per share at the higher levels observed a year ago. Since recession indicators have not been
signaling a future recession yet, the market, in assessing dour fundamentals, may simply be
pricing in higher risk. Remember, from late 2011 until early 2015, the p/e ratio of the SPX nearly
doubled.

The bull case in 2016 was never going to be easy since not only do the economy and corporate
profits need to improve, but the better results cannot be too strong less the Fed tighten the
screws faster than They have led us to expect. It's called "threading the needle" and we only
get one try.