We are BULLISH and PROUD of It!

You can let the headlines determine your investment philosophy if you want to...that is if you want to be a pertpetual loser.  For us, we chose to follow those pillars in the instrument panel below that determine the market's future performance.


You can see that the weakness of last week strengthened Psychology somewhat - moving it back to a rating of P2.  When our Psychology Composite is P2, that means that it's rating is in the top 20% of historical rankings based on the variables that we've discovered have a direct impact on future stock market performance.  And when you have Psychology, Monetary, and Valuation so historically strong as they are today, you remain BULLISH.  The ONLY thing that would preempt our level of bullishness would be a change in our Market Trend Analyzer that would dispute that message being shared with us by Psychology, Monetary and Valuation and tell us to look for some historically unorthodox variable that's disrupting the normal course of events.  However, that kind of message is not something that is imminent or probable based on the market's current actions.

Also, we have seen some economic news lately that provides some hope for the US outlook.  What did you think about that employment report on Friday?  While everyone was shouting how weak it was, and that we are far from the 200,000 gains needed, it is interesting to see that the last two months were revised UPWARD by 102,000.  According to James Paulsen's (of Wells Capital Management) post-employment report, he suggests that this economic expansion is right on par with the two prior economic recoveries from the 1991 and 2001 recessions.  Of course, the most recent recession was much worse than either of those, but what Jim is saying is that the recovery is still very much on track with current available labor forces.  Take a look at this chart from the St. Louis Fed's FRED site via Carpe Diem.

Click on the image above to view a larger chart.

The recent recession and status of the recovery is being accomplished with 6.6 million less employees, but the amount of GDP is actually as high as it has ever been.  This suggests that American productivity is extremely high and that we are turning out even more product with 6.6 million fewer jobs.  If you are one of those 6.6 million without a job, it is bad, but as James Paulsen assures us, the recovery is still very much in the mold of what occurred after the 1991 recession.

While this is only one datapoint, there is plenty of good (improving) news out there, and as we look around the world, we see the good news in America is leading the pack.  While we cannot predict the future, we do know that when our Asset Allocation Model is in as bullish a position as it is in today, history suggests that the future is bright.

So today, we are BULLISH and PROUD of it!

Don Hays

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