SPX -- Monthly

The monthly SPX is overbought and hyper-extended when compared to its post WW2 price channel.
There is no price bubble as happened at the end of the past century, and the overextended nature of
the current market does not match the 'bubble echo' which occurred over 2006-7. SPX net per share
is expected to be right around the trend line plot since WW2. Viewed historically, the SPX p/e ratio
at about 18.7x is a hefty 2.5 multiples above the very long term average and directly reflects the
nominal level of short term interest rates and current historically low inflation. The Phillips
curve -- the inflation rate varies inversely to the unemployment rate -- has failed in recent years
as the economy has progressed slowly enough not to trigger off a bout of cyclical accelerating
inflation which has some punch to it. These developments have triggered off a round of  'new era'
thinking in which the economy is seen as able to progress without experiencing the sort of credit
crunch that could trigger off deep earnings and p/e multiple cuts (reversions to norm). According
to a growing group of strategists, it may not be the best of all possible market worlds, but is a
damn fine one. SPX Monthly

There are critics who maintain correctly that proclamations of a new era for stocks will ultimately
turn out to be bullshit and that this will, too. They will be proved right, but when a nastier time
will arrive and how well the market might do in the interim are $64 K questions. There are
features in play now -- the failure of the Phillips Curve and the growth of excess private sector
liquidity in the wake of an already lengthy economic expansion -- that are truly novel. The balance
that exists in both features now are underwriting the market's advance and given their novel
nature, signposts of imminent disruption will not be easy to proclaim directly. This is somewhat
of a 'thinking man's market' and curiously enough, those type of markets are usually weak and
are not making new highs. The best of luck to you!