The Long & Short of Today's Stock Market

We are just on the borderline with our Psychology and Monetary Composites.  Psychology actually dipped under slightly for a bit to a P4 ranking, and then scooted back into the P3 zone on June 19th of last week.  The Monetary Composite is very similar in that it is just treading on the dividing line between M1 and M2.  But those zones are not that critical anyway to the expected results.  Take a look at today's conditions below.

The long of it is actually best portrayed by the Valuation and Monetary combination that gives very high upside potential for this US bull market.  For an historical reference, you know that our Psychology Composite gave us short-term heartburn in early February of this year when it moved into that P5 zone that does raise the short-term risk, but in combo with the strong Monetary and Valuation Composites, continued to suggest that such risk was a correction risk, and not the end to the bull market.  As I've recently stated (here), Psychology is very good about calling bottoms in bear markets, but bull markets don't end until our Monetary Composite raises the red flag.

Taking a look abroad for a moment, the old adage of "If the US catches a cold, the world will catch the flu," is being tested today in reverse.  There is no doubt that the rest of the world has caught the flu, so is the US going to have to suffer from a cold?  As we pointed out of Friday (here), there is a divergence in the messages provided by our US Equities MTA and our International Equities MTA, which is quite a telling tale.

So with that said, the only thing that can circumvent the above infrastructure is the current status of our Market Trend Analyzer (MTA), the safety valve designed to buffer any unexpected, unorthodox crisis condition; however, the MTA continues to tell us to let the three pillars of Psychology, Monetary and Valuation guide us through today's market.

So that's the long and short of our posture.  We don't really like the fact that we have that dysfunction between international and domestic stocks; however, here in the US, I guess you could say "so far, so good."

Don Hays

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