SPX -- Weekly

The stock market is in a primary down wave, but for both fundamental and technical reasons, I
have remained an agnostic on its true course for the remainder of the year. the US economy has
lost substantial growth momentum, but is still expanding, and the classic pre - conditions for
development of a recession are not in place. Business inventories remain high relative to sales
but are starting to run off and even a modest boost in final demand will chase the inventory to
sales ratio down. The oil price bust, which has hurt SPX net per share, is coming rapidly upon
a major seasonal low, and even a minor rally in oil will at least stabilize index earnings. The
strong US dollar which has sapped US export sales has been wavering. There are also signs that
inflation, and with it business pricing power, are bottoming. To top it off, the SPX is now quite
oversold on an intermediate term basis. SPX Weekly

My guess has been that the SPX could close out the year at 2160, but with no Fed policy tailwind
at our backs, there is no compelling reason to bank on this guess. The better course for an old
guy me like me will be to jump on rallies from deep oversold conditions as the year progresses
rather than to fret over year end 2016 guess work.

Of note on the chart is the pivotal role of SPX 1850 going back to the end of 2013 when it was
made clear that the Fed's QE 3 program was set to wind down to a close. The market could not
hold recent support at 1875, but it is interesting that it just bounced above the 1850 level. Notice
also the heavy downside volume over the past two weeks. Wishful thinking perhaps, but that
sometimes happens with part time players.