We're coming out of the fog!

I was astounded at the mute attention the stock market got last week as it was making astounding upside breakouts to confirm the good news for tomorrow.  Almost as astounding, the VXO is treading on the 17 level that set the stage in the past for persistent 3-4 year up-moves in 1994 and 2004.

The employment report that grabbed the headlines on Friday displayed that the unemployment rate moved up from 9.6% to 9.8%.  But lo and behold, the stock market moved up, even on the heels of two powerful moves on the previous days-confirmation of good news, not bad!  It's not hard to understand why investors have ignored the headline "bad news," since the underlying data in recent days has been so good.

If you have ever driven in fog, you see the old experienced hands will drive a little slower and be ready for anything sudden, while those not used to the fog simply pull over.  And when the fog starts to lift, and you can see what lies ahead, the experienced drivers gradually get back up to speed and the nervous inexperienced drivers slowly merge back into traffic.  The fog was dense in July as only the experienced drivers were able to continue onward.  But since then, as they returned to cruising speed, they passed many of those stalled drivers on the side of the road.  And in the next few months, those on the side of the road should start moving back into traffic.

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Don Hays

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