Economy
The US economy has improved sharply from the spring depression level lows. However there is still
plenty of slack. The business strength indicator has recovered rapidly to the 127 level, but is still
below the 140 - 145 area which indicates solid expansion and strong resource utilization. My profits
measure has continued to improve but is still well below positive. The labor market remains down-
trodden with 30 million people collecting some form of unemployment insurance. The price deflation
measure has eased dramatically, but still signals more business defaults ahead. My leading indicators
signal that a slower rate of economic improvement may lie ahead.
Markets
The SPX is still overbought for the intermediate term, but less so. The market trend is still positive.
Importantly, large and broad unweighted measures such as the Value Line Arithmetic ($VLE) are
slightly below the 2018 high, and show clear evidence of market player preference for large cap.
stocks, especially the big techs. I look far more favorably on stocks when the unweighted averages
are leading the market higher.
The gold price has outperformed the SPX since the spring of 2019 and has beaten the pants off the
"average stock" over the same interval. Gold has gone parabolic as it often does when it is in a
bullish phase. It is technically overbought and awaits further weakness in the SPX to regain strong
favor.
The US Dollar is technically oversold at present and has started a counter up move on player
concerns that the US economy may well lose recovery momentum in the months ahead. A
slower pace of economic growth would reduce inflation expectations and might also worry
folks about how well the global economy will do. My key indicator for the Dollar is the ratio
of the balance of payments to GDP. That ratio continues to improve, but I think market players
have a much broader macro view of the currency at this time.
Finally, I am one of those folks who doubt Trump will accept an election defeat. If he loses, there
could be some harrowing moments for the US and its markets.
