Bulls in Control

With another month of trading concluded, lets take a look at the long term charts and indicators I use for the market. Before proceeding, the story remains a bullish one. And in terms of this "long term model" I use several different variables and each one of them, aside from the murky economic story, continue to argue the bullish case for stocks. The measures I use are as follow:

• Renko Monthly Charts for the Major Indexes
• The Important 13 month Moving average for the S&P
• The "Trender" model which essentially measures the trend of the markets from another perspective
• The P Indicator which measures the long term momentum of the market
• An proprietary model that measures both the overall trend of the market and the momentum of the same given equity markets.
• Economic Model that features corporate, money and consumer

The last model is a new one as I am trying to gain a better understanding of the economic environment in an effort to forecast the marketplace going forward - though at the same time, forecasting beyond today is an impossible challenge in my opinion! Here is an update on each.

RENKO VIEW

The View from the Renko charts, has not changed much since last report. The momentum is still pointed to the upsde and there is a slight risk in the S&P chart which shows negative momentum to the downside but the moving average component has not been taken out yet - thus the overall model remains bullish. The Dow breakout continues to the upside and the Russell remains bullish as well. Thus from a pure momentum standpoint, the overall market is pointed higher.

13 MONTH VIEW

The 13 month model among the major indexes argues that the markets trend is pointed higher. The break away from the 13 month MA in the S&P 500 this morning is a very bullish development in my opinion as it argues or confirms that the reversal below and then back above is taken by the broad market traders as a bullish signal which goes towards strengthening sentiment and a foundation for the stock market as a whole across the small, mid and large cap stocks. The next steps for this model is the following; follow through and sooner than later take out the highs of the previous peak.

TRENDER MODEL

Trender model continues to support the bullish case and the underlying momentum end of the model is close to a breakout to the upside. I did not update the chart because a) the breakout has not occurred and b) the rest of the components basically look the same. Bottomline though, a breakout on this model argues that a bigger move in stocks is coming and the reversal point is typical of bull market correction turns - not bear market extremeness.

OWN MODELS

These model shows good turns momentum wise but the momentum on the S&P barely crossed into positive territory. The last time we had a pivot like such was in 1992 when the markets bounced back after a drilling to the downside. The market one year later was up about 15% so if follow through to a more positive point develops this month, then I would get more optimistic that the S&P is sitting around 1250 sometime a year from now. Some problematic issues that could come to the forefront is the downward trending "trender" built within each model - this by itself is not enough to get worried but does reinforce the fact that the markets need to bounce strong into year end. On the other side of the ledger, the BMT model, which measure the primary trend of the market taking into account risk, earnings, rates and stock price action, took a hit but remains positioned for higher prices. Thus my own models are bullish.

P INDICATOR

If you remember, I noted that this indicator is another measure of market momentum and is modeled after the KST model of Martin Pring. The current model remains basically the same as last report and argues that prices continue to move higher. There are some issues with the longer term models which seem to be rolling downward but it is early and moderation in their momentum is not unheard of at this juncture of the bull.

Economics

The economic situation shows an expanding corporate sector and manufacturing profile. My net ISM indicator continues to argue that we are in the expansion phase. the labor model is mediocre at this point with earnings a noticeable problem. At the same time, prices are deflating as both of my inflation models argue that inflation is nowhere to be seen (within the numbers - not at the grocery store!). The money figures are troubling in that the Fed is pulling money out of the system (contrary to what they spit out this morning). Money movement is improving but moving towards a stall which can be a problem for assets - essentially assets need money movement to continue to improve...at least that is what more correlation measures tell me. The fact that loan and leases remain weak and revolving credit remains downward pointed does not support the long term picture of things. On balance the economic picture is murky.

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