It seems to me that we are slowly rounding our way into a summer swoon. We are not into full-blown technical breakdown yet, but cracks are appearing. But as happened last summer, the expiration of QE is - coincidentally or not - coinciding with a significant breakdown of fundamentals.
Doug Short regularly updates a chart comparing Consumer Metrics Institute's Growth Index of economic activity with national GDP and the S&P. It has been a decent leading indicator, and the Growth Index is off a cliff... worse than last summer and worse that 2008. Yet the S&P is holding within a few percent of its multi-year highs.
Another useful indicator is Treasuries. Though not necessarily a lead indicator, Treasuries continue to push higher. Michael Riddell posted an interesting chart showing how the 10 year Treasury interest rates have closed tracked the Citi Economic Surprise Index. The chart indicates that rates are likely to continue to head lower, a scenario that typically doesn't bode well for equities.
Nothing has changed with the long term picture for the S&P. It broke under the primary support but held at a trendline that runs through the 2010 lows. However, it looks to have failed to cross back above that primary trendline today and is likely to retest that weaker trendline soon.
Chris Kimble noted that high yields, which have an excellent history as leading indicators, have started to break down a bit. On the other hand, 30 year Treasuries continue to push higher from an inverse "head and shoulders"
It's been a theme for a while now, but be careful. It seems to me that there is a good bit more downside risk than upside potential over the next through months.