July was a good month for stocks: the S&P retraced half its decline from April's 1220 peak to July's 1010 low and closed the month at 1101 - right in the middle of our 'decision box.' Technically, with the primary trend still flat, the stock market is giving few technical clues as to the viability of the cyclical bull market. The call is thus a fundamental one: Can the global recovery be sustained without fiscal stimulus and allow governments to gradually pay down debt? We believe it can, but it is a close call.

David Fuller's view I suppose it is a matter of perceptions and what one is used to, but I think the fundamental outlook is more clouded than the technical picture. After all, there are few modern precedents for the current debt crisis. Also, the radical antidote provided by central banks is neither proven nor unproven. Moreover, leading central banks, not to mention economists, disagree more than ever as to the correct policies to follow. That may be fine for markets but in for monetary and fiscal policy, it is more than mildly disconcerting.

However, a view based entirely on the USA economy and even the OECD economies is somewhat myopic. The economies of the progressing nations, which represent vastly greater populations, are in comparison, purring along at respectable GDP growth rates, albeit with some inflationary pressures. The least controversial and known fundamental factor in common for all stock markets concerns valuations which are moderately attractive.

What about the technicals?

They too can be obscure and highly subjective, particularly when technicians claim to see parallels with ancient, long-term cycles which may or not reoccur on any basis that can be practically monitored by investors with buy and sell decisions to make.

What about technicals on a less grandiose, closer and more practical look?

Monetary policy remains generally accommodative and this trumps most other factors most of the time. The US Yield Curve remains highly positive and nowhere near the danger zero line. The Ted Spread as a measure of bank to bank lending confidence is falling back once again after its recent rally and is not high in historical terms. Sentiment, as The Weekly View points out, was extremely bearish near the July lows and this is a contrary indicator. The S&P 500 Index may have only returned to the middle of its trading range but stock market indices which led following the October 2008 lows and in many instances also led during the 2003 to 2007 bull market are leading to the upside. In fact, a number of these have registered new highs recently, as we have been pointing out.

Unreversed, this evidence is likely to moderate bearish expectations or fears, except among those who prefer to tell the markets what to do.