Market Brief: Monday, October 4, 2010

I've mentioned several times (probably a zillion) in these letters that you have to have benchmarks to guide you.  You can't figure everything out and take off toward your target.  That's why we have our Asset Allocation Matrix to guide us.

We advised last week that we didn't see big trouble, or maybe any trouble, in the current markets, but it was most certainly time to put your aggressive bullish side in slow motion.  We had several of our Psychology Composite indicators move out of their green zone, and a few have even kissed the first of the red zone.  The calendar says this is the week that third quarter earnings start coming out, and with the oscillators overbought enough to lead our Psychology Composite to project a more neutral reading, it is time to sort of let it coast for a while.

Admittedly, we liked September's market action.  In most indices, we had higher highs and higher lows.  And if you dissect the different indices, you will see that the growth components are leading the way.  That made us happy as we remembered reading the incessant gurgles of the "double-dippers" back in July.  However, the message of today's stock market will not be the same as that of previous recoveries, but with the combined Technology Revolution and the "flattening of the world," the future looks bright for those investors with the courage to combat all of the current background discolorations.

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Don Hays

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