Where did the Double-Dippers Go?

It's almost like that politician's famous statement.  "I was for it, before I was against it."  That might not be an exact quote, but it's a very typical type of statement for politicians...along with economists and market strategists.  And now after those enduring weeks of "being against" the economic recovery, analysts are now moving "for" the economy.

If you remember, only a few weeks ago, there was a lot of consideration that the 3rd quarter earnings were going to be disappointing, so the analysts started downgrading their estimates.  It seems as though it is a lot better in today's environment to be too pessimistic than to be overly optimistic.  Yet, according to Ed Yardeni's group (http://www.yardeni.com/ & http://blog.yardeni.com/),  of the 134 companies of the S&P 500 that have already reported earnings, 69% of them have seen both a positive earnings and a positive revenue surprise.  That sure doesn't make it sound like this economy is running out of steam to me?

As we've mentioned in previous weeks, and as you can see in last Wednesday's post, our instrument panel measuring Investor Psychology, Monetary Conditions, and the Stock Market's Valuation (along with our Market Trend Analyzer) continues to give us nothing but green lights.  Furthermore, we are continuing to watch this market play out a similar pattern to last year's correction, as we've mentioned many times over the past few weeks.  You can see this similarity in the market's internal action, and the indicators below are a few good examples of this recurring rhyme.

Click on the chart above to view a larger image.

Click on the chart above to view a larger image.

However, I'll caution that you not bet too much on this recurring, but this pattern is helpful to use to "play around the edges" for your portfolio fine-tuning.  Often when you try to fit markets to rhymes, about the time you get the tune, they change to another song.  So yes, we suggest that you watch for it, but the bottom line is that you need to be bullish, and this rhyme is just for "playing around the edges."

Don Hays

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