The Long Treasury Bond %

The long Treasury bond has been a little tougher to trade since the end of 2015. Last year the yield
was slow to rise despite indications the economy and inflation were both set to accelerate. This
year the yield was slow to fall despite the sharp reversal of inflation. It remains in a down trend
mode currently even though inflation indicators are starting to inch up.  $TXY Weekly

The bottom panel of the chart shows the relative strength of the SPX against the USB (long Treas.
price). As seen, emerging, negative sentiment on stocks pushes asset allocators to rotate out of
stocks and into bonds. Interestingly, the bond has enjoyed the lower inflation so much this year ,
that it has held up relatively well against the SPX through much of the year.

I would rate the bond market as still a bit oversold at present levels. The long Treasury % is over
20% higher than it was a year ago (top panel of chart), and is falling below its falling 40 wk. m/a.
You will note from the chart that changes in the direction of the 40 wk. tend to both confirm trend
and suggest that it has further to go.

Should markets players get nervous about the stock market over the next couple of months,
top quality bond yields may decline more (and prices rise) as stock traders seek a safer haven.

SPX -- Weekly

Everyone knows this a well advanced bull market where you have to choose the most generous
valuation methods to get even somewhat comfortable. Price momentum has remained positive
but has deteriorated noticeably since the SPX hit a major intermediate term overbought at the
outset of 3/17. Weekly cyclical economic indicators suggest that both the economy and business
profits momentum have probably peaked. On the plus side, continuing low inflation and negative
real short rates have helped the SPX p/e ratio stay elevated. As well, there is a fairly strong
investor consensus that the economy is a good year away from a genuine downturn. Fewer
players are confident that the Congress can pass tax legislation in the months ahead that might
assure a longer run for the business expansion, but hope has not been abandoned totally. Trump
has fucked up royally over the past three weeks via the North Korean flap, the handling of
the Charlottesville demonstrations, and more recently, his vicious verbal attacks on top GOP
operatives in the Senate and the press. Likely tough fights ahead on the debt ceiling, the budget
and tax reform have grown more worrisome by stupid behavior from the White House. So, the
market has lost some ground over August, although there has as yet been no downside breakaway.
SPX Weekly

There may be trouble ahead in September if the SPX fails to get above its 13 week m/a and move
back up toward 2500 right quick as that would signal more extended damage to already shaky price
momentum. 

Gold Price

The gold price was trashed over the last four months of 2016. It had reached a dramatic speculative
top by Jun. - Jul. and this was accompanied by the decline of inflation thrust indicators in the
latter part of the year.  Gold Weekly

As the current year has progressed, the US dollar has weakened and the inflation pressure gauges
have been in a bottoming mode. The gold price has advanced fitfully in 2017, and has found
resistance at the $1300 oz. level. The tenuous advance probably needs for the inflation pressure
gauges to strengthen further as the year progresses. The weaker USD has not resulted in a sharp
advance in the important oil price or other key commodity composites and the lack of inflationary
follow-through has generated some gravitational pressure on the gold price.

Gold is not overbought and its 40 wk. m/a has just started to turn positive. However, intermediate
term resistance is formidable at $1300 and gold may suffer if there is another fail in the next few
weeks. Short term, gold can hold its uptrend if it can remain above $1250 on a retrenchment.

Stock Market -- Aug. 1 -- Nov.1 (3)

Trump's behavior on North Korea and then over Charlottesville have significantly undermined
investor confidence both in his ability to provide sound presidential leadership and to provide
in-depth direction for key agenda items such as the budget, debt ceiling and broad tax reform.
People are correct to harbor serious doubts about the guy and with such critical agenda items just
weeks away, The Donald has little time to turn matters around. The market has sold off in recent
weeks, but players have hedged bets only mildly so far, and many may have already abandoned
progress on Trump fiscal programs while basically remaining bullish on the 6-12 month outlook.
VLE Weekly

The broad Value Line Arithmetic has broken the uptrend line in place since early 2016 and has
violated its 40 wk m/a for the first time in two years. Momentum and breadth are eroding, volatility
is on the rise, and, as shown in the bottom panel of the chart, there are early indications the
market is setting up to change direction for the intermediate term. There is price support for the
VLE just below the current level.

The market is bending lower, but it has not broken yet.

SPX Daily -- Quickie

Long time and knowledgeable New Yorkers like myself are hardly phased anymore by Trump's
thoroughgoing egomania. But, some of us were surprised by how far he went off the rails this
Tuesday in his improvised and morally distorted press conference in the lobby of the Trump
Tower. He lost his business councils of prominent CEOs and has senior GOP elected officials
questioning his fitness to be a successful president. What was surprising was that it all happened
live and in full public view. Decent, conscientious folks (including a number of investors) have
been exhausted by the ugly melee in Charlottesville on Sat. past and its troubling aftermath,
stoked by Trump himself. The stock market took a drubbing again today as some traders started
to question how thin the ice is that they have been happily skating upon.  SPX Daily

The market has slipped into mild corrective mode with support at SPX 2400 and I am certainly
not clear on whether market players will quickly move to correct the damage or whether
more traders and investors will want to trim positions further and sit back to see if  the current
troubling political shit storm settles down. God knows, they have already given this guy the
benefit of the doubt.

Trump's competence and fitness to be president is finally coming to the fore as a factor at a time
when serious economic and financial issues are going to hit the calendar soon after Labor  Day.
Folks want to see the Trump Team's fiscal programs and hopefully intelligent outreach to the
Congress and do not want to see him consumed by bitching over Confederate statues and
symbols of a war fought over 150 years ago. Lasting damage has been done to his reputation
but his guys have to fight like hell now to get him back on the rails.

Stock Market -- Aug. 1 -- Nov. 1 (2)

Patriotism, as they say, is the last refuge of scoundrels. And, in Messrs. Trump and Kim, we have
quite a pair. I am having trouble believing that this contretemps is more than a giant Trump
smokescreen, with North Korea a willing accomplice.Trump is falling in the polls. He fumbled
his end of the health care bill and special counsel Mueller and his group are taking a hard look at
whether serious financial crimes were committed involving Trump et al and Russians. With the
fire and fury threat, The Donald has drawn attention away from increasing political weakness.
But, since there is no guarantee this is not an exercise in reality TV fakery, but is instead a crisis,
the stock market took a jolt this week.  VLE Weekly . The Value Line Arithmetic dropped sharply
this week and is at shorter term support just under 5500. Moreover, the index is set to test its 40
week m/a and has broken the uptrend in place since the latest advance began in Feb. '16. These
are 'heads up' factors for the broad market, and we'll have to see next week whether the latest
contretemps between the US and the PRNK will fizzle and provide relief, or persist and worsen
and lead real to genuine trouble for us and the market.

Market breadth last week took its sharpest drop since prior to the 2016 election. The NYSE
A/D line could be ready to test its 13 wk. m/a and the rising trend lines from Feb.'16 and the post
election rally have been broken. Note, however, that the A/D line is still well above its 40 wk.
m/a., so a longer term test may still be a ways away.  NYAD Weekly

The bottom panel of the chart shows the VIX or volatility measure. It has been in a jagged
down trend since the autumn of 2015, but last week's bounce broke that. This represents
another 'heads up' for the market.

Well then, have we entered a more volatile and corrective interval that has characterized so
many past Aug. / Oct. periods? Too early to tell I say, especially since you have a bullshitter
like Trump as the instigator.

Stock Market -- Aug. 1 -- Nov. 1

History shows that the period of August through the end of October can be volatile with no shortage
of price corrections and even a couple of crashes (1929, 1987) thrown in. It is a period when market
players critically assess what their year may look like and are also forced to look at the next year
more seriously. It has also been a time when the Fed tightens the reins on liquidity ahead of the
typical holidays easing interval toward year's end.  Seasoned investors know the history and are on
heightened alert. As well, it is a time to plan portfolio and rotational change for the following year.
So, you may find plenty of cautionary market commentary from fundamental and technical sources
show up in you in-box. For all I know, the market may skate smoothly right on through this period,
but I plan to showcase it weekly to avoid boredom from taking further hold.

Now there are contentious political issues ahead, including raising the debt ceiling, trying to settle
on a budget and the possible introduction of tax reform legislation. Tax reform could be a plus if
tax cuts come into play, or a bust if talks do not even start in the Congress or fail when they do.
Moreover, as autumn wears on there will be Fed behavior to study and speculation about who, if
anyone, might replace Ms.Yellen as chair. Finally, the Mueller investigation of Russia / Team
Trump is moving into probable cause territory with two grand juries now open for business.

I will focus on two charts. The first is the Value Line Arithmetic price chart, an unweighted index
of over 1700 closely watched issues. Secondly, comes the NYSE cumulative advance / decline
line.

The Value Line ($VLE) is trending up but has lost substantial momentum since early in the year.
The weaker positive action reflects the potential for slower economic growth over the rest of
the year which is also reflected in weekly forward looking economic indicator data. This index
is holding its positive trend line from early 2016, but just barely.  VLE Weekly

The NYAD is in a second wave up from Feb. '16. It has lost momentum this year, but is stronger
than the VLE. This suggests investor preference for large cap stocks. The VIX is shown in the
bottom panel of this chart. It is in the low end of the historic range, and we'll see how it fares
over the Aug. / Oct. period.  NYAD Weekly