Too Many Moving Parts

The older my body gets, the more I catch myself believing that it has too many moving parts.  If my head feels good, my feet may be hurting, and vice versa.  I'm blessed with pretty good health, but there are simply too many moving parts that have a tendency to wear out or at least get a little restricted in their efficiency.

Don't you get the message that in today's world there are simply too many moving parts?  How do you make sense of it all?  For example, we have the currency markets that are tossing "to and fro."  The euro is teetering on making a lower low, and from a chartist's perspective, it would be one more confirmation of the teetering condition of that unified currency.

Click on the image above to view a larger chart.  Source: William O'Neil

Iran, Iraq, Afghanistan, Pakistan, Mexico, Brazil?  We could write entire volumes on the moving parts of those countries and how they affect our world.  Yet, that just touches the hem of the garment in describing the complexity of our business and life based on countries external to our borders.  So, let's skip all those moving parts and come home to the USA.  Wow!  Looks pretty good all of a sudden.

The Unemployment Insurance Claims dropped sharply last week to 381,000 and the 4-week average is at its lowest point since February.  Also, Consumer Sentiment had a big bounce-back last week, and Christmas sales seem to be humming along...but at the same time, we have the ECRI, a leading "expert" on business cycles, telling us that a recession is headed our way, and the latest news hasn't affected their prognosis.

So, who do you believe - Nouriel Roubini, Bill Gross, Ed Yardeni, James Paulsen, ECRI?  Too many moving parts!

We have one conviction, and that is that the stock market is the best barometer known to mankind, and in our opinion, we have never seen any compass that predicts the stock market as accurately as these combined barometers.

So, our bottom line remains bullish, even as our Psychology Composite has moved into P4 territory.  Today, we're just not expecting an upsurge of the same percentage as we had a few weeks ago when this composite was at P1.

Don Hays

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