38 Days in the Stock Market's Volatility Torture Chamber

Have you had enough yet?  I have!  If you think any other kind of punishment is tough, they should put those hardcore prisoners through this "Volatility Torture Chamber."  The following chart shows the action of the S&P 500 on each day for the last 38 days.

Click on image to view larger chart.

The "prisoners" that are giving up, screaming for relief, are out there in full view.  They are running to T-Bills that are paying less than inflation - anything to escape this torture.  Mr. Market suffered 2 climactic days in the first week of August 2011 that nose-dived the stock market (DJIA) down 1100 points - as Obama and Congress were in the last days of getting an agreement ready on the US debt situation.  It was enough to wake up the doomsdayers, and they have been out in force.  That massacre occurred in those days when Congress was bickering back and forth, but as the market tanked, they agreed to form that Super Committee to come up with an agreement by Thanksgiving or else.

Since that agreement, the stock market has experienced those "fits and starts" shown above in the chart of the US stock market.  Believe it or not, the US stock market has outperformed virtually every other major (and minor) international stock market in these last 38 days by a wide margin.  So, this is not just US fear, but international fear.  It is not just the US Congress, but economies and politicians all over the world are seeing the impact of the "Volatility Torture Chamber."  Of course, the old adage still stands that if the US catches a cold, the rest of the world catches the flu.  So far, the new Flat World has not changed the ultimate importance of the US stock market or economy.

Yet, as you are well aware, at Hays Advisory we let our Asset Allocation Model determine our posture.  We are very interested in the Super Committee and very interested in seeing the housing mess resolved, but we know from experience that the only insight we should rely on is the relationship of Psychology, Monetary and Valuation, with our safety net, the Market Trend Analyzer in place.  And today, this is where we stand.

Click here to read today's complete Market Comment.

Don Hays

Please see important disclosures at the bottom of this page.