SPX -- Weekly

Fundamentals
12 Month net per share for the SPX hit an all time high of $114.50 For the Sep. '14 Q3. Since,
annual net has declined to around $105. for Q4 '15.Real economic growth has slowed persistently
since the late summer of 2014, pricing power has eroded, and my selling price / cost measure has
come under modest pressure at the macro level. Other notable factors have been the blow out in
the oil price and a stronger US dollar which led to slower export sales and currency translation
penalties. The deterioration of earnings fundamentals has carried over into early Jan. this year,
with leading economic indicators reading flat.


the dividend yield of the SPX sits at 2.3%, and is well above the level of cash equivalents, but the
p/e multiple is under downward pressure reflecting ebbing investor confidence over the erosion of
the business outlook. Book ROE% is 13.5, but is under pressure from declining net per share.
Internal growth potential has dropped to a below average 6%.

From my perspective, risk capital needs to earn on average 10% per year. The SPX does not clear 
this hurdle and the outlook for sales and profits needs to improve markedly through the year for
the market to have economic value.

Technical
After an extended topping process around the SPX 2100 level the market has entered a primary
downtrend. However, the SPX is now deeply oversold on an intermediate term basis, and given
the volatility in evidence since last Aug. one simply cannot take an extension of the weakness in
the market for granted. Let's see how the heavy oversold plays out. SPX Weekly