The Stock Market Continues to Meander Along

Okay, so we've endured the last 12 months, and if you bought the S&P 500, you are up a small smidgeon - 1.2%, but you did have to experience that serious correction last year.  Here's a visual of the year that we've had.

Over the last year, our Psychology Composite has been a good gauge to watch as we examined short-term conditions.  The rank of this composite one year ago was P3, but it was on it's way to P5, while our Monetary and Valuation Composites were at their best levels.  But when Psychology moved to P5, the short-term risk also moved higher.  Then, at number 2 in the chart above, our Psychology Composite was screaming at us to buy, from a short-term basis, and Monetary and Valuation were confirming that bullish signal by remaining in their strong positions.  Hence, combining with the strongest seasonal period of the year, it set up the strongest January rally in several years.  But as we evolved into that late January period, Psychology returned to the P5 zone and the lack-luster last few months have been a testimonial to that short-term caution light that was blinking.  But remember, Monetary and Valuation continued to say the risk was only short-term, and the long-term potential outweighed that risk.

So here we are this morning.

As you can see above, Psychology has meandered back into that P3 zone, and our guess is that despite the onset of earnings season, and despite the economic, political, and European concerns, the stock market will meander some more in the months ahead.

Don Hays

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