The S&P 500 hit an all-time high on August 2nd and is up more than 18% so far this year. We do not yet see signs that this cyclical bull market could be ending. As we wrote last week, we believe a sustainable US economic expansion is underway that will support stocks until fears of a recession return. However, we think that the S&P 500's trend of appreciation is likely to slow for the rest of the year, and there could be a 3% to 5% correction during the next two months.

David Fuller's view RiverFront cites their three useful investment rules in this issue. 1) "Don't fight the trend." This is still upwards, although it appears to be tiring to Fullermoney and it is certainly overextended relative to its 200-day MA. 2) "Don't fight the Fed." This is by far the most important of the three rules, in my opinion, and the Fed is still pumping $85bn into the US economy, although it is likely to commence tapering before yearend. 3) "Beware the crowd at extremes." RiverFront point out that "Crowd Sentiment Polls from Ned Davis Research have risen into the extreme optimism zone", although they often move somewhat higher before markets react significantly.

The cyclical bull market since March 2009 has certainly reached a mature stage, as I discuss in more detail in the Audio, but the monetary policy tailwind should prevent any significant sell-off, despite some choppy action as QE is tapered.