What Headlines is the Stock Market Predicting for Tomorrow?

I was intrigued by a comment that I read by Scott Grannis this morning featuring the effects of the shutdown of the 405 freeway in Los Angeles.  The surrounding area was informed of the possible catastrophic weekend of that highly conjested highway last week, as so many predicted that it would produce massive repercussions.  Well, they've now had the shutdown, and they saw virtually no repercussions.  Everybody knew about it, and they stayed home.  Now some of the residents, who enjoyed the effects on their lifestyle, are calling for this thoroughfare to be closed every weekend.  Scott drew this comparison, which is so timely, that if everyone knows about something, the ill effects are minimized - or even eliminated.

So, what does EVERYONE know about this morning?  They know of the peril of the Euro and the terrible condition of the debt in Spain, Portugal, Greece, Italy, etc.  They know of the budget talks and the deadline for the US debt default.  The know of the price of oil and the lack of clarity about taxes and healthcare benefits.  They know of the housing crisis and the lack of new buying.  They know of Afghanistan's corrupt government and the cost of fighting the Islamic terrorists.  They know...

And this has been the result.

Click to view larger image.

You see, the stock market does not measure today's headlines, but instead it knows tomorrow's news.  This year has been in a sideways stall, as the market read those "soft patch" headlines of today back in February.  But so far, so good, as it continues to digest that correction that (so far) appears to have bottomed out about a month ago.  And this morning, our Asset Allocation Model continues to suggest a fully-invested posture based on the gauges below.

Even though Psychology is at its next to worse level, our Valuation and Monetary Composites continue to outweigh such bad news as they remain in their strongest and most bullish positions.

So, that's our reading of tomorrow's headlines for this morning.

Click here to read today's complete Market Comment.

Don Hays

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