The Stock Market is Very Oversold, but Investor Psychology Hasn't Improved to our Preferred Level

We're finally seeing some fear, and whether you admit it or not, you're probably feeling a little more squeamish than you were a couple of weeks ago. 
We've been very persistently saying for over a month that many facets of our Psychology Composite were telling us to go slow until we got some relief. we're getting some relief.  I know, it is a strange term, since my gut doesn't feel so relieved.  The fears are rising.  So why do we call it "relief"?  The relief comes from the fact that this "fear" is always an important ingredient in producing market bottoms. 
During the June 4th bottom of this year, we did receive a low point that allowed our Psychology Composite to move to P3, and it got close to that desired level of P2, but it didn't quite cross the line.  And now, we haven't seen enough "relief" to move our Psychology Composite even to a P3 rating.  It's close, but it's not quite there yet...and it's certainly not to our "preferred" P2 zone.
The good news is, the stock market is very oversold.  In the chart below, you can see the very oversold condition of our McClellan Oscillator. 
This orange line in the chart above (21-Day Oscillator) still hasn't quite reach the desired -100 stage, but we suspect it will be there fairly soon.
The bottom line is that we have very bullish monetary conditions, and that is very bullish for the next 12 months.  We also have a very undervalued stock market, and that is very bullish for the next 12 months.  And lastly, we have a very oversold stock market, and that is pretty good for the immediate future of the next few days, but Psychology tells us that we still have to keep our short-term caution light on.
Don Hays
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