Stock Market Factors

The SPX closed out today at a new cyclical high to confirm the uptrend. The market is
moderately overbought against the 25 day m/a as well as against the 200 day m/a. The
SPX stands 8.2% above the 200 day m/a. Your careful attention is required when the SPX
goes to a 10% premium to its 200 m/a. The market remains extended in price compared
to its price channel up from Nov. '12. SPX And Indicators

The top panel shows the VIX or volatility index. Traders often use the VIX to measure fear
and complacency in the market. You can peg an uptrend in the market off the late Sep. 2011
interim low through the present and note that the VIX has been trending down over this period
suggesting rising confidence. When the VIX falls to a reading of 10.0, investors are seen as
smugly complacent. The current reading is now a low 13.2. When the VIX rises, players are
thought to be growing fearful. When the VIX crosses 20.0 on the way up, you should take note
as well.

My advisory / polling sentiment indicator is excessively bullish at a reading of 65.0. Over
the last couple of weeks. the index has moved up from the mid - 50s to a range of 61.0 - 63.5.
Opinion is indeed starting to warn of optimism that is cruising toward the fringe of exuberance.

The first of the bottom panels in the chart compares the relative strength of the SPX etf to the
long Treasury. Rising strength indicates players are in "risk on mode". This ratio is again up
to the substantial resistance levels seen back in 2011. No reason the ratio cannot motor up
through resistance, but good reason to know we are there now.

The final lower panel looks at the relative strength of cyclicals against the broad market and
is a good gauge of investor opinion regarding SPX earnings potential. This is an important
measure because: 1) earnings leverage resides with the cyclicals; and 2) Players like relative
strength in earnings when structuring portfolios. The uneven uptrend in the ratio shows how
carefully investors are weighing earnings potential this year.
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We in the New York area are experiencing our fourth annual "Storm Of The Century", this
time in the form of a blizzard tabbed as "Nemo"... Hope the power stays on, but if not, the
next post will be a few days out.