The stock market has rallied from that June 4th low of 1278, when it looked as if we were about to repeat the tough corrections of 2010 and 2011, and now it is within a whisper of hitting that prior high made this year in April. The S&P 500 is now up 12.8% for 2012 - not a bad year. How can this be?
I always have to remind myself that the stock market reacts to tomorrow's news, not today's. So just maybe there is some good news on the horizon. What hint is our Asset Allocation Model giving us this morning about tomorrow's news?
The shorter-term psychological forces have "evolved" into a P4 ranking (as of last week), but when you think about it, Monetary and Valuation are continuing to tell a different story - much more bullish - for the longer-term "wall of worry." When there is this much monetary liquidity, it means FEAR is still prevalent to force saying - not worrisome euphoric spending. And when stocks are this cheap, it means only one thing - investors are hoarding cash, not chasing stocks.
We'll have to take it one day at a time as we wrap up this summer. We're watching carefully to see if we get a breakout above this year's previous high; however, we're also still watching to see how the upcoming election impacts the stock market.
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