SPX -- Weekly

The SPX is still running OK positive, but the broader market, featuring breadth and unweighted
price indices like the Value Line Arithmetric ($VLE), are lagging and falling behind on trend
momentum. At this stage, there is a growing preference for the larger cap. more liquid names.
My weekly cyclical fundamental economic indicators have been on the flat side since late Jan.
and suggest a loss of positive economic momentum out ahead. Unweighted market measures are
performing more in line with the economic data weeklies as the SPX rolls on. I have argued in
recent weeks that the SPX had a reasonable shot at rising above 2400, but I have run out of short
run insights to support a continued advance and see no compelling reason for the SPX to move
above the recent high of 2450. Weekly SPX

The bottom panel of the chart shows the relative strength of the Value Line to the SPX. As can be
seen, the SPX can easily outpace the VLE for the intermediate term, but a market led by a broad
array of mid - cap. and smaller cap. favorites is healthier and more sustainable.

Of note here is that the Senate is set to take up the nasty health care bill this week. If the Senate
leadership can horse trade its way to passage of the bill, it might boost the spirits of investors
who are still considering the large tax cuts for the wealthy in the bill as a set-up and lead-in
to the tax reform proposal.