I always say that people do not trade the markets; they trade their beliefs about the markets. In that same way, I'd like to point out that these updates reflect my beliefs. If my beliefs and your beliefs are not the same, you may not find them useful. I find the market update information useful for my trading, so I do the work each month and am happy to share that information with my readers.
However, if your beliefs are not similar to mine, then this information may not be useful to you. Thus, if you are inclined to do some sort of intellectual exercise to prove one of my beliefs wrong, simply remember that everyone can usually find lots of evidence to support their beliefs and refute others. Just simply know that I admit that these are my beliefs and that your beliefs might be different.
These monthly updates are in the first issue of Tharp's Thoughts each month. This allows us to get the closing month's data. These updates cover 1) the market type (first mentioned in the April 30, 2008 edition of Tharp's Thoughts), 2) the five week status on each of the major US stock market indices, 3) our four star inflation-deflation model plus John Williams' statistics, and 4) tracking the dollar. I will now report on the strongest and weakest areas of the overall market as a separate SQN™ Report. And that may come out twice a month if there are significant market charges.
Part I: Van Commentary—The Big Picture
If you look at overall trends for the stock market, they are bullish but flirting with normal.  The Market SQN score has come way down from its high earlier this year, while the S&P 500 is still near its all-time high.   Is this bullish behavior or is it a tired market?
Gold and silver are not strong at all, despite a relatively weak dollar, however, there is little sign of inflation around (except from the shadowstats.com folks). 
And the fundamentals of our economy are as weak as ever but are being supported by the Federal Reserve QE process.  
And that’s the big picture in a nutshell.
Debt Clock

The State of the United States
Month Ending	National Debt	Federal Tax Revenue	Federal Spending	Trade Deficit	Debt Per Family	Unfunded Liabilities	Workforce (taxpayers)	People supported by them
July 31 2012	$15.93 trillion	$2.364 trillion	$3.632 trillion	$810 billion	$684,405
Dec 30 2012	$16.42 trillion	$2.452 trillion	$3.540 trillion	$740.7 billion	$732,086
July 31, 2013	$16.89 Trillion	$2.73 trillion	$3.535 trillion	$703 billion	$748,458	Unfunded Liabilities	115.2 million	109.9 95.4%
Dec 31, 2013	$17.27 trillion	$2,82 trillion	$3,480 trillion	$692 billion	$751,294	$127.2 trillion	115.0 million	108.5M 94.3%
Jan 31, 2014	$17.32 trillion	$2.84 trillion	$3.494 trillion	$676 billion	$752,026	$127.7 trillion	115.2 million	108.8M 94.4%
Feb 28, 2014	$17.38 trillion	$2.86 trillion	$3.503 trillion	$683 billion	$752,554	$128.1 trillion	115.4 million	108.4M 93.9%
Mar 31, 2014	$17.57 trillion	$2.89 trillion	$3.519 trillion	$683 billion	$758,057	$128.6 trillion	115.6 million	107.9M 93.3%
Apr 30, 2014	$17.51 Trillion	$2.91 trillion	$3.528 trillion	$683 billion	$758,598	$128.9 trillion	115.8 million	108.8M

Right now our total unfunded liabilities are $128.9 trillion (with most of that being Medicare and prescription drug liability) at $89.4 trillion and $22.3 trillion, respectively.   Social security unfunded liability is only a little less than our total debt at $17 trillion.
Today, our official debt is over $17 trillion and it’s going up almost a trillion dollars every year. Furthermore, the debt situation is so bad that the Federal Reserve has had to hold short term interest rates to almost zero and long term rates to very low numbers. This is killing the U.S. dollar and interest rates have nowhere to go but up.   In fact, betting on eventual higher interest rates is about as close to a certain bet (long term) as you could ever make.
According to the debt clock, our official national debt stands at $17.51 trillion, down $60 billion from the prior month.  How did that happen?  The US population is at 318 million with taxpayers standing at 115.8 million.   The Boomer retirement wave has begun and retirees now stand at 47.5 million.   Disabled people collecting social security stands at 14.3 million, while food stamp recipients total 46.2 million; so that’s 108 million people that are supported by the government (or the 115.8 million taxpayers). But really about 11.5 million taxpayers pay 90% of U.S. taxes.  This means that 11.5 million workers are supporting 108 million other people through the government. Do these numbers add up to you?  Do they seem sustainable?
Part II: The Current Stock Market Type Is Bull Normal
Each month, I look at the market SQN® score for the daily percent changes in the S&P 500 Index over 200, 100, 50 and 25 days. For our purposes, the S&P 500 Index defines the market.    On April 30th, the SQN 200 and 100 were both Bull (the SQN 100 was just up from Neutral the day before).  The SQN 50 and 25 were both Neutral.
Market volatility is at the edge of normal and heading towards the quiet range so this market may be less dangerous than last month, but at the end of the month the reading was normal.
Flash Update: I wrote this update on May 1st but it’s not going out until May 7th so you should know that the market type just shifted to Neutral Normal.   That is the market type for the 100 day period, 50 day period, and 25 day period.  In addition, we are not that far off of the highs of the year but the SQN score has already moved down to Neutral.   That same shift happened in 2007, just before the decline; in 2000 before the decline; and in 1987 before the decline.   Be careful in the market.
Below is a chart of the weekly changes in the three major US Indices.     All three indices are up for the year, but not by a lot.   For a year that set record highs, very little has happened since that time.   
Part III: Our Four Star Inflation-Deflation Model
In the simplest terms, inflation means that stuff gets more expensive, and deflation means that stuff gets cheaper. There’s a correlation between the inflation rate and market levels, so the inflation rate can help traders understand big-picture processes. 
Looking back over the most recent two-month and six-month periods provides the current month’s score, given in the table below.

Month	DBC2	DBC6	XLB2	XLB6	Gold2	Gold6	XLF2	XLF6	Total Score
	Higher	Higher	Higher	Higher	Lower	Lower	Higher	Higher
Feb 14		+1		+1		-1		-1	+0.0

Last month was the first time in 13 months we saw a move toward inflation, although not a strong one.  This month our score was zero, so inflation is certainly not a concern.  Deflation has been predominant, as we continually point out, in large part because banks are not lending.  The money multiplier put out by the Fed is still at 0.7 rather than the normal 3.0 level that we tended to see where the stimulus was really working.   It’s interesting because the Fed discontinued the old data series and now does it on a seasonally adjusted basis.  Regardless, the graph still looks the same.
Part IV: Tracking the Dollar
Since its peak in July, the USD has been on a downtrend that recently gathered strength.  It’s now clearly broken $80 but last month was in a range between $80.6 and $79.3.   This range is quite dangerous and it is dangerous for the US stock market.  
General Comments
I’d like to show you a table of market SQN results for 100 days on the S&P 500.  The market hit its all time high close of 1890.90 on April 2nd but the market SQN was at only 0.98, far off its high of 2.02 back on January 14th.

Date	S&P 500 Close	SQN Score	Commentary
1/21/14	1873.91	2.02	Highest Market SQN Score for 2014.
4/02/14	1890.90	0.98	All time high close on S&P 500.  Notice how much lower the Market SQN Score is than it was 2.5 months ago.
4/30/14	1883.95	0.70	The Market SQN has been neutral and is only just above that range, despite the S&P remaining close to its all-time high.

I’ve been doing some market type research lately and this kind of behavior also occurred in 1987, in 2000, and in 2007.   Does this mean that we are going to get a crash?   That’s possible but I have no idea.  The market SQN does not predict.  It merely tells us what the market has been doing over the last 100 days up to now.  Stay tuned.
We held our Bear Market Workshop over the weekend from May 2nd to May 5th.  Not a lot of people registered which could be a sign that a major bear might not be far off.   Our greatest attendance ever at a workshop was in March of 2000 when we had 71 people at a stock trading workshop.   Lack of attendance at a bear market workshop might be a similar kind of sign. 

About the Author: Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program—a highly regarded classic that is suitable for all levels of traders and investors. You can learn more about Van Tharp at [You must be registered and logged in to see this link.] His newest book, Trading Beyond The Matrix, is available now at matrix.vantharp.com.