Sep S&P E-minis endured a volatile week that saw prices tumble to a 2-week low but then rebound sharply higher to just below their recent 1-month high.

Bearish factors include:

(1) concerns that the economic recovery may not be sustainable after Fed Chairman Bernanke's report to the Senate Banking Committee that the economic outlook remains "unusually uncertain," along with his comment the US faces the worst long-term job market since the "Great Depression" and that many banks still have "a large volume of troubled loans on their books and bank lending standards remain tight,"

(2) the report from the US Labor Department that said payrolls declined in 27 US states in June, which signals that the slowdown in hiring is broad-based, and

(3) the action by Goldman Sachs to cut its Q2 US GDP estimate to 2% from 3%, citing a loss of support from fiscal stimulus and inventory replenishment, state and local budget constraints, the excess supply of vacant housing, a lack of credit and weak employment gains.

Bullish factors for stocks include (1) an upbeat Q2 corporate earnings season that has seen 85% of the 124 S&P 500 companies that have reported Q2 results since Jun 12 beating earnings estimates, and (2) the plunge in the 10-year T-note yield to a 1-1/4 year low of 2.86%.

Fundamental Outlook-Bull Market Correction

The US stockmarket recovered nicely Thursday from its the early-week sell off as a mostly positive Q2 earnings season offset sobering comments from Fed Chairman Bernanke.

The US economic recovery so far remains intact and stock market valuations are very reasonable (S&P 500 forward P/E of 13.3 vs the 5-yr avg of 15.3), which leaves room for a resumption of the bull market.

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