As we often say, you have to take the bias and emotions out of the equation when examining the stock market, and that is why we have our asset allocation process to guide us. So, what is our Asset Allocation Model telling us this morning?
To briefly summarize, the gauges above are suggesting that the smart players have been baiting the dumb players, and as Psychology (our measure of smart money vs. dumb money) moves deeper and deeper into the yellow and red zone, it's suggesting to not trust today's headlines too much, since the smart investors are diminishing their bullishness, while the dumb investors are increasing theirs. But you have to put that in balance with the other two major factors - Monetary and Valuation.
Valuation is suggesting that you still have the best historic values being offered in the current price you are paying for stocks. This is a function of the fear that is still overwhelming the trillions of dollars that are paralyzed on the sidelines afraid to buy stocks. Then, Monetary is suggesting today that the Fed has the pedal to the metal, giving (basically) free cash to anyone that wants to promote growth.
Lastly, the Market Trend Analyzer continues to guide us and suggest that the bullish trend and historical conditions are still dictating the future course of the stock market, so we should trust the indicators.
If you are a subscriber to HaysAdvisory.com, click here to read our recent reports. If you would like to learn more about the research and commentary offered by Hays Advisory, click here.
Please see important disclosures at the bottom of this page.