Stock Market Oversold, but...

It's August 19th, and if stock markets have a dull time, history suggests that the next few months are it.  We are approaching the end of the summer, and so far, this has been a great year for investors.  The US stock market has dramatically outperformed the international markets and other major asset classes.

Today, if we just have our short-term glasses on, we see that the stock market is in oversold territory, as measured by our oscillators below.

It is not hard to see that this usually sets the stage for a rally.  This helps our Psychology Composite some, but we are still in that P4 stage, and that is not something that gets us excited about the next few months.  At the same time, however, our Monetary Composite is not only at a very bullish M2 rating, but internally, it is not far (once again) from sneaking back to M1, which is very, very bullish for the next few years.  And then our Valuation Composite remains at V1, which is very bullish for the next 4-5 years.  

So, we remain very bullish for the future, but believe that the conditions of the next 2-3 months will be a time of digestion and possibly a correction.

Don Hays

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