Stock Market in Neutral

We have three indicators as green as they can get…and that is very good.  That puts our equity allocation only one tiny notch from being as bullish as you can get.  And when I say one "tiny" notch, I mean TINY.  Our matrix still says maintain maximum bullishness and minimum cash positions. 

This day we say, as we did two weeks ago, that the stock market is experiencing a "changing of the guard."  Two weeks later, the signs are strong that this is indeed the experience we will be enduring.  You can see by the relative strength in the "growth" segments of the market that the larger, slightly less growth, but more undervalued stocks are taking the lead.

For the last two years, each time the public gets a little excited, the market has to cool off and cool off the emotions of those new-to-the-party investors.  We’ve shown you the progression before, but the Psychology Composite often calls these impending "changing of the guards."  So, when it moved to P5 a week ago, and even before that as it was showing some signs of "too much," we started edging our "fine-tuning" cash up to the 10% level just in case.  I’m always afraid these tiny "fine-tuning" adjustments will be misinterpreted, so keep this in context with the M1 Monetary Composite rating and the Valuation of the S&P 500 being "Extremely Undervalued."

What will it take to move our matrix to the most bulllish, upper left-hand box?

To view today's complete Market Comment, click here.

Don Hays

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