The Control Panel shows several positive trends that indicate optimism about the real economy. These have been supported over the past couple of months by increases in the money supply, but the money supply has recently leveled out. Financial conditions are loose. The velocity and monetary multiplier are low. Money is pumping into the asset market but not the real economy, otherwise consumer price inflation would rise.

The Fear & Greed Index is still in Extreme Greed, but the needle has been gradually falling over the past couple of weeks.

Every stock index and sentiment indicator is very strong, with bullish sentiment writ large. The "mungofitch lagged MA" is hitting new highs. The ratio of the S&P 500:gold is climbing above its MA and will soon be at the peak it reached 2 years ago, in early 2011 (if it continues the trend).

The trade remains risk-on.

Gold has been stable within a very narrow channel for the past couple of months and within a broad channel since its pullback in late 2011.

The USD is stable within a narrow channel.

Treasury yields continue to trend upward. The real (inflation-adjusted) yield of the 10 year Treasury is about zero (instead of negative) and the 30 year Treasury actually has a positive real yield of about 2%, the highest it has been for quite a while (though still lower than the historic average). Inflation for 2012 was reported at 2.1%. The implied 10 year inflation rate (Treasury minus TIPS yield) is 2.5%, which is close to the long-term average.

Copper and energy prices have recently been rising, though they have been in a stable channel for the past year.

The "mungofitch ratio" of copper:gold has been in a stable channel for the past year. It has recently been rising.

ECRI says that a recession is underway, although their index of leading indicators is positive, as is the Fed's.

Real personal income excluding current transfer receipts is rising, as are new factory orders and the Purchasing Manager's Index, both for Manufacturing and Non-manufacturing.

The recent charts are all rising. The longer-term (a year or more) are channelized. We are now at the tops of the channels.

Will the markets break upward through the channels? Or will they descend again and stay within the channels?

Wendy

http://stockcharts.com/freecharts/candleglance.html?$INDU,$S...

http://stockcharts.com/freecharts/candleglance.html?$IRX,$US...

http://money.cnn.com/data/fear-and-greed/

http://data.bls.gov/timeseries/CUUR0000SA0?output_view=pct_1...


http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&m...

http://research.stlouisfed.org/fred2/series/GS10
http://research.stlouisfed.org/fred2/series/FII10

http://research.stlouisfed.org/fred2/series/M2
http://research.stlouisfed.org/fred2/series/MZM
http://research.stlouisfed.org/fred2/series/MULT
http://research.stlouisfed.org/fred2/series/M2V
http://research.stlouisfed.org/fred2/series/NFCI
http://www.businesscycle.com/
http://research.stlouisfed.org/fred2/series/USSLIND
http://research.stlouisfed.org/fred2/series/PAYEMS
http://research.stlouisfed.org/fred2/series/PIECTR

http://research.stlouisfed.org/fred2/series/AMTMNO
http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942
http://www.ism.ws/ISMReport/NonMfgROB.cfm?navItemNumber=1294...

Just wanted to say thanks again, Wendy, for aggregating these data each week. I find it a handy "one-stop-shopping" reference source.

I'd like to offer a different take on this comment: "Every stock index and sentiment indicator is very strong, with bullish sentiment writ large."

I don't view the charts for the DOW, S&P 500 and Nasdaq as indicating strong movement upward at this point in time. There was that weeks ago, but now these indexes are treading water, more or less. The MACD indicators have been direction-less. They won't stay that way for long.

Given that more than half my portfolio consists of overseas stocks (plus US companies that derive a significant portion of their revenues from overseas sales), I following major global indexes as well. Here's the Eurozone CandleGlance group:

http://tinyurl.com/am7gcg8

Things seems to be breaking down a bit. (OK, granted, the Nikkei is on a tear but I consider Japan's economy a complete fantasy world).

The emerging markets offer a more confused picture:

http://tinyurl.com/45brxf2

China (Shanghai) is definitely on the upswing. But Brazil (Bovespa) and India (Sensex) markets are deteriorating.

All in all, I agree with your general assessment, but I grow increasingly cautious. I'm now at 25% cash and have my "Sell List" handy by my side.

The "mungofitch lagged MA"

The "mungofitch ratio" of copper:gold

============================================

However, the oft quoted Mr Fitch himself is conspicuously a non participant on metar.

Some might wonder about that. Others, maybe not. Having read him for years, he has a very un-PC attitude that might make for an awkward fit. For instance, as regards investment banking, he would agree with Buffett and not the political column of Rolling Stone. I have also seen him try to give some realistic context to the BP oil spill and the Fukushima disaster. So you won't see him on PA or climate change or atheist or metar or those kinds of boards.

<the oft quoted Mr Fitch himself is conspicuously a non participant on metar.>

Mungofitch has generously given permission to use the indicators he developed and backtested.

mungofitch is quite eloquent and able to speak for himself. I would not presume to guess why he chooses not to participate on METAR, and I suggest that you withhold your speculations also.

Wendy

<There was that weeks ago, but now these indexes are treading water, more or less. The MACD indicators have been direction-less. They won't stay that way for long.>

I agree with you. My point about channels is that even the short-term breakdown in international markets is within the long-term channel. If they stay in the channels, all the markets will break down soon. However, if they break upward definitively out of the channel (which hasn't happened for 2 years) it would be a sign of a new bull market.

I don't see the fundamentals (real economy, fiscal, monetary) improving to support a channel breakout within the next 6 months.

What do you think?
Wendy

I don't see the fundamentals (real economy, fiscal, monetary) improving to support a channel breakout within the next 6 months.

What do you think?
Wendy
------------------------

Just adding my two cents,

the fiscal policy tightens up front. The American Taxpayer Relief Act raises taxes on just about every tax payer.

I still think this year the FED stops or slows how many bonds it is buying in the open market.

And gasoline prices may spike more so if we threaten Iran more so. That might only be temporary if at all, but higher gasoline prices would take a lot out of an already bad economy.

Dave

I don't see the fundamentals (real economy, fiscal, monetary) improving to support a channel breakout within the next 6 months. What do you think? - Wendy

I agree. While it's possible that the Markets (US & global) could break upwards, I see no fundamental economic reasons to believe they will. To the contrary, I see all sorsta headwinds that suggest a downturn in the Markets is the likeliest near-term outcome.

Interestingly enough, though I'm short-term bearish, I lean towards an expectation of higher Markets by the end of the year. I happen to agree with those who believe that the suppressed yields in the bond markets will nudge investors towards equities. As a consequence, though I'm raising cash at present, I intend to plow that cash right back into stocks if and when there's a "correction."

As an aside to rubber's talk of gas prices, just thought I would ad an observation. Gas shot up 20 cents overnight last week where I live in extreme northern coastal CA to 4.19 at the regular pumps. The local cardlock station where gas is cheaper was unusually crowded even though the gas is said to not be as good.

Edy