There's no Place like Home!

We've got two more weeks of this year, and I don't know about you, but I'm ready to put it behind me.  The year was muddling along until August, and then those two weeks of August have pretty much determined how you feel about you intelligence this morning.

Click on the image above to view a larger chart.

Four trading days (those highlighted in the chart above) probably changed your performance for this entire year.  That was when the OEX Option Volatility Index (VXO) screamed to 50, which also helped move our Psychology Composite to P1 following such actions.  So, if you are sitting here with your dunce cap on in this year's performance, its probably because you got slaughtered in those FOUR days that turned the crowd extremely cautious.

It is all over the map, but if you were smart in 2010, it is likely you are hiding in shame this morning - unless you flipped and flopped right before those four days.  The point here is, did four days change your life?  It certainly changed your emotions. 

How about 2012?  What will it bring?  It is a guess, obviously, but you are seeing a definite change in the world's economies.  We have the situtation in Europe on one hand, the developments in the Middle East on another hand, and the situation with the government here in the US on yet another hand.  We believe that we are entering a period of the next 20-30 years, much like corporations entered in 1980 when they had lost control of their cost and profit margins to unions, when governments have to yield productivity enhancers and fight productivity destroyers.  It won't happen overnight, but it has to happen.

Today, our Asset Allocation Model is sending us this message for the US stock market.


You can see above that our Psychology Composite moved from its P4 reading last week to its current reading of P3.  When it is so close to the mid-range as it is now, it doesn't take a lot to move it from one side of the ledger to the other.  But either way, it says that the US stock market is still very attractive for investing, and the "safety valve" Market Trend Analyzer is continuing to tell us to follow the three composites of Monetary, Psychology and Valuation.

The stock market has spent the last 19 weeks digesting that panic from August.  There are never guarantees, but at this time it does appear the US stock market is surviving and recovering from that shock.  With that focus, we're looking forward to the New Year, and at this time, there is no place like home, as the US stock market is displaying a much more advanced and sustainable recovery than anywhere else in the world.

Don Hays

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