Stock Market

The week before last, the boyz were hollering for a break above SPX 2400 as they feared having
to deal with a double top. And they got one! The market loves to punish the vocally demanding,
but not this time. Last week's advance keeps the post election rally alive, at least for the large cap
sector of the market. The trend up from the Nov. low remains sharp, but there remains little room
to avoid a break in the weeks ahead. The SPX remains moderately overbought on a momentum
basis. It was allowed last week that it could break above 2400 in the short term and there is still
a little bit of room to push it higher. However, the SPX remains heavily overbought looking out
3 - 6 months. SPX Weekly

The weekly cyclical fundamental directional indicator has been flat since the end of Jan. this year,
but it has improved nicely over the past couple weeks reflecting the remarkable performance of
the new jobless claims indicator which has dropped sharply to a 44 year low. Total civilian
employment is up only 1.0% y/y, but it is the jobless claims data that wags the dog here. I would
like to see more positive breadth among the weekly data, but initial claims has been a trader
favorite for years. Among the indicators, sensitive materials prices have turned weak since early
in the year. This development has been a nice positive for the bond market and it may also account
partly for investor preference for large cap stocks.

From a fundamental indicator perspective, the cyclical case was very strong for equities for most
of 2016, but has weakened appreciably since earlier in this year. the SPX is holding its uptrend
nicely in 2017, but without strong and comforting cyclical support.