The Dominoes are Starting to Fall

We sit here in 2012 and we only remember those conditioned reflexes of the last 4 years when all the negative dominoes were falling.  But now we're ready for the other side of the evolution.  The dominoes have been reset, and the process has been in the preparatory stage.  Now, the action has progressed to the tipping point.  Just take a look at some of these charts below from Calculated Risk.



Click on the images above to view larger charts.  Click here to view the source.

The dominoes have already started the process.  Now at last, the mind boggling slow progress to cushion and cure the massive financial crisis is going to start its positive progression.  I have my strong preference for the next President of the United States, but it is almost a certainty that whoever is elected will go down as a hero by the time 2016 rolls around.  The cycle is poised to show dramatic improvement regardless.  These steps in the evolutionary process do not have to have words, you can see plainly that one step sets off the next one.

Today, in our opinion, there are about equal odds of success for the next 3 months in the stock market, but HUGE odds of success for the next one year (according to our Asset Allocation Model); however, we currently see the market very overbought, which you can see in the chart below.

Click on the image above to view a larger chart.

So, there is "some" short-term risk here, but that risk, in our opinion, is not worth losing out on the outstanding long-term potential.  So yes, we are being a little more critical in our short-term strategy; however, we're also remaining true to the message that we're receiving from our Asset Allocation Model.

Don Hays

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