It's a Time to Have Patience with the Stock Market

Well, well, well...Goldman Sachs is getting a lot of publicity issuing its new report with the very bullish theme that the stock market's outlook is the best in a generation.  Of course, we like the report, and our esteem for Abbie Cohen is very high, but that is old news isn't it?  Let's review where we are if we take all of our biases out of the equation and if we eliminate all of the headlines and all of the gurus that get featured in each ominous (or promising) situation, and just depend on the history of the stock market to direct our bullishness or bearishness. 

There are, indeed, times when you have to listen directly to the stock market, and those are the times when everything is sitting close to a very ominous situation in which normal conditions could be turned upside down if someone in the driver's seat loses their direction.

On March 2, 2010, our Market Trend Analyzer gave us the message to return our total dependence to the message provided by our Psychology, Monetary and Valuation Composites.  It is nice to hear that Goldman is excited about today's valuation, but take a look at what our Valuation Composite was saying for all of those days after April 2009.  You can see below that the intense fear generated in 2008/2009 also presented the best value for equities in at least the last 30 years.

Click on the image above to view a larger chart.

We've now spent 3 years with this powerful stimulus moving stocks higher.  So today, we have the real maestro, the only messenger we know of without a marketing-driven bias, providing us with the following message.


As we've stated many times over the past few months, this message continues to paint a very attractive long-term picture; however, with Psychology recently dropping to P5 and Monetary falling to M2, the odds of short-term volatility and/or dysfunction have gone up.

So, that is where we are today - expecting this period to be one when you have to have patience.

Don Hays

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