Looking Ahead....

From my perspective, the outlook for the US economy is getting a little dicey. my favorite
financial liquidity measures have deteriorated markedly over the past year or so. Fed Bank Credit
and the Monetary Base continue to shrink. Real or inflation adjusted M-1 growth has been
declining and is now barely in positive territory. There is not sufficient financial liquidity in the
US system to support both real economic growth and a rising stock market on a sustainable basis.
On the plus side, private sector credit growth is still positive and short term interest rates have not
increased enough to assure development of a recession in the US. As well, the economic slow-
down may have suppressed some of the financial liquidity measures temporarily provided the
economy can regain more positive footing in the months ahead. In short, economic trouble may
lie ahead but it is not a lead pipe cinch. One also may reason that if more economic red flags
appear, The Fed may intervene with additional liquidity and cuts to short term rates. This is a
reasonable assumption, given Trump's willingness to challenge The Fed openly along with a
supporting cast of risk capital managers.

There is now a consensus that the US and China may strike a trade deal. If so, this will remove
an obvious negative for the global economy and it might help the prospects for US business
and corporate profits out through 2020 and beyond. But damage has been done to the US base
of liquidity and it remains an open question whether there will be enough benefit to put the US
economy on a more solid footing.

If a trade deal with China is struck, it will of course be quite interesting to see the details and
whether any concessions China may have made will be enforceable. Trump let economic issues
with China out of the bag, and if the deal lets China off the hook enforcement wise, figure the
Democrats will look for ways to make an issue of it.

If I was a younger guy actively managing money, I would likely be stuck selling the recent
rally and building a cash kitty to await improvement in the US liquidity environment.

The SPX chart still shows a near term overbought condition and trouble staying above the
2800 level.  SPX Daily