SPX -- Weekly

Fundamentals
The stock market has been in a strong up leg since Feb. '16,  a move that brought it to a new all-time
high as Mar. of this year began. The weekly cyclical economic indicators turned positive around the
Feb. last year and powerful momentum for this indicator set appears to have provided the requisite
underpinning for the market's advance. The indicators are forward looking and it may be important
to note that this set has now been flat since Jan. of this year, suggesting economic momentum may
slow out ahead. In turn, the SPX, which hit an interim peak at the outset of Mar., has been in
moderate corrective mode since. The market hardly moves in lockstep with the indicators, but the
suggestion here is that, barring an upturn of the indicators, the SPX should continue on the flat
side. As a secondary factor at this point, inflation pressures have recently eased, and this may keep
the Fed from more aggressive tightening action over the near term. A less aggressive Fed is a
positive for stocks, but since the progress of the SPX over the past year has been fueled by expec-
tations of strengthening progress of business sales and earnings, there could be an adjustment
process for stocks to complete, especially since the development of new fiscal measures to
stimulate economic growth may be getting pushed further out in time as the Trump team figures
out how to work better with the Congress.

Technical
The SPX has been working off a substantial intermediate term overbought. There is nothing in
the weekly chart to suggest this process is about to end. Adjustment is already well underway
with the RSI and oscillator measures, but the important MACD measure has just turned negative.
Moreover, the SPX is still at a 4.6% premium to its 40 wk. m/a. The premium is contracting,
but it is still significant. There is no inevitable negative conclusion, but do not ignore the
evidence.  SPX Weekly