Quit Screaming at Me!!

Are you feeling the same way I am - that everyone is encircling you and screaming at the same time?  They are screaming about the debt ceiling, the world default, the risk of stocks, the imminent failure of the US, the [fill in the blank], and on and on and on.

I suspect that someone somewhere once recognized that if you scream anything to anyone long enough, they would start to believe it as TRUTH, whether it is or not.  I can't stand screaming.  I love silence.  I know it is very popular to keep those ear buds in your ear, with some kind of music (?) blaring.  I know the students of today say that they can't conentrate unless they have the music (??) giving them the rhythm.  I know silence is anathema to concentration in today's world.  Yeah, right!!  But please stop screaming.  I refuse to believe - just because you are wearing me down with your screaming.

In some ways, that is the value of our charts that are updated each morning on our website.  It breaks my heart if you are "only" reading our blog posts, and letting me scream my message at you all week.  I covet your wisdom, and I believe those 5 minutes you spend a day (without those ear buds poking out of your ears) quietly listening to the underlying message that the charts are giving you will calm your nerves and lower your blood pressure.

One important chart that I would like to highlight is the NASDAQ Overbought/Oversold indicator, which is shown below.  As we've said many times before, the market had been showing a very dysfunctional personality at least since late last year, as the underlying power of the advances was unable to move many measures to a higher high.  As you look at the chart below, you can see that the major buy signals worked like precise clockwork, as each drop into oversold territory produced a rally.

Click to view larger image.

But this time was different.  We got the strong rally, and for the first time, the strength (power) of the rally moved conditions to higher high levels not seen in the last 18 months.  Typical bull markets produce alternating moves from oversold to overbought, but this one had failed the test for a while.  We regard that as a hint that the realy underlying bull market enthusiasm is coming back.  But of course, at the same time it says the short-term is overbought and could stand a corrrection.

However, our Asset Allocation Model is still giving us the same long-term signal that it first gave us on June 13th to give maximum exposure to growth, and that means stocks.  So, we choose to listen to our mix of Monetary, Psychology and Valuation indicators (instead of all the screaming) as we wade through the currents of this market.

Don Hays

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