Our overall market view remains positive, but with reservations. The trend is up: for the 12th week out of the last 13, a majority of indices/sectors closed >13ema. This week: all 4 US indices and 9 of 9 SPX sectors. TLT is still below all its MAs.
For the second week in a row, several ex-US markets have been <20-dma and diverging with US, including Euro 350, DAX, EEM and All World Ex-US. Euro and Aussie currencies are also weakening. $USD closed at its high for 2013. The US will resynchronize with the other markets.
Breadth is also in neutral for a second week in a row with NYMO oscillating at the zero line. NYHL continues to diverge, lower. Again, these divergences can persist for a month or so. But, unless corrected, these are likely to be late stage signals.
One change this week is a downgrade to Valuation. S&P data shows a second sequential decline in quarterly EPS growth. Overall 2012 growth may be just 2%. To be conservative, a lower forecast for 2013 is warranted, putting PEs near 15 and above average. 50% of SPX earnings are foreign, and Eurozone GDP growth is now negative; another headwind.
Sentiment and macro expectations remain the headwinds as well.