March 9, 2009 to March 9, 2011

The talk of the town is that today is the second year anniversary of the current bull market that kicked off on March 9, 2009.  Remember how bad the news was back then as Bill Gross and Nouriel Roubini were being interviewed 24/7 about the foreboding future of the US (and the rest of the developed world)?  At that moment in time, the action of the S&P 500 was almost exactly copying the action of the same length of time as the 1929 stock market that foretold the worst Depression in the history of the US.  I don't care who you are, you were scared and very apprehensive that the US financial structure could be put back together. The consumer was over-spent, over-borrowed, and their houses had lost 20%+ of their value.

So today, everybody is writing about the second anniversary of that date in 2009, but they are still not too confident of the future.  So, what is our anwer?

As always, we have our insurance policy, the Market Trend Analyzer, in place, just in case, and as our followers know, it told us that conditions were returning to "normal" on March 2, 2010.  That was a year ago, and back then, the naysayers were still just as negative on the future of America...and certainly the stock market.  But since March 2, 2010, the stock market has told us to expect a healthy evolution and to trust the evolutions of Psychology, Monetary, and Valuation (shown above) to help us predict tomorrow's headlines today. 

As you know, our Monetary Composite adjusted downward to M2 last week.  But as Mark Dodson explained in his recent commentary, M2 is still very good and supports a good economy...and stock market.  And the Valuation of the stock market remains Extremely Undervalued at -28.9% based on normalized earnings expectations, inflation pressures, and the yield of normalized bond yields.  The only weak link is Psychology, which is currently at P5, but we're seeing some improvement as this up-and-down yo-yo market evolves. 

It is obvious that we're delighted to see the two-year anniversary of this bull market, but our real celebration involves getting back to the trend that existed before October 2007.  A lot of water has gone over the dam, but America and the World have been disciplined, and we believe we will benefit in the long-run.

Don Hays

Please see important disclosures at the bottom of this page.