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Market Comments


• The market as measured by the S&P 500 (SPX) is in the process of retesting the breakout point of a well defined six month range (1st chart), which should be considered a healthy pull back. The retesting process has done nothing to change the near-term uptrend and the market has reached into oversold territory (2nd chart) suggesting a bounce should be forthcoming. I also believe the bounce will be brief due to the extended position of the intermediate-term framework as outlined in Monday's report, 3rd Quarter Outlook.

• The second quarter was marked by broad move higher. In my view the third quarter should be marked by high volatility with limited progress in either direction.

• Would characterize the quarter as a transition and "good enough" quarter. There should be a transition from the perception that the fundamentals are getting better to the reality of whether they are or not. The recent rate cut and prolongs this phase as investors can still use argument that the monetary and fiscal stimulus has not had time to work its way into the system. Instead of potential being only story, it remains part of the story.

• This transition and "good enough" environment should favor a rotation to more defensive and consistent growth areas such as the Consumer Staples as money slowly rotates out of second quarter momentum areas as the quarter progresses.

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