Don Hays says bear market rally to continue (after short-term pullback) BUT:
In fact, one leg of our 4-legged approach that we use for our asset allocation model has just been destroyed. That is the
valuation leg. You can also see that chart on our website, and a description of how it is calculated. But as of the beginning of
this week, the valuation of the S&P 500 moved up to being extremely overvalued once again. On the day we received the
positive signal on our asset allocation model, December 22, 2000, the daily calculation of this valuation model had dropped
into the “fairly valued” category by being only 4.7% overvalued. With the psychology, monetary and the valuation all being
positive, it pushed us into a more positive stance. The monetary and psychology legs are still intact, but the market now is
back to being supported by only three legs. That’s still okay. You can sit on a 3-legged stool, but if one more leg is removed
from a positive reinforcement, that will push us back into a defensive stance. I don’t expect that for several more months, but
if occurs sooner, we’ll jump. |
