News is always late - sending a message of yesterday's trends, and it actually often does more harm than good. With this new focus by investors (and the media) on these new highs (seen in the chart above), our Psychology Composite and the Value Line Appreciation Potential tell us that it makes sense to get a little less positive for the short-term. You can see our Asset Allocation Model's current readings below.
This decision may be right...or wrong, but it makes sense. The odds of a short-term correction are still relatively high. As the S&P 500 moves up to that shoulder line (or maybe a slight upside break-out) that could set the stage for any short-term consolidation.
However, with the configuration above, odds are still positive for the long-term (12 month) outlook for stocks. And with US corporations flush with cash, the mergers and acquisitions of the last 14 years dramatically reducing the supply of stocks to buy, very few new IPOs, the economic uncertainty of Europe, bond yields at artificially very low levels...the only game in town seems to be US stocks.
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