You could point to any number of reasons why stocks finished their best month of gains in nearly 25 years with a whimper, but the most common answer I have heard is that they were simply overbought after running straight up for the past three weeks. Of course, if you go with that reasoning, your next question should be, "when will they be oversold?" and how do you know if this is a short-term dip or the beginning of the next bear market?
Don Hays, the Chairman and Chief Investment Strategist of Hays Advisory has 3 words to describe the current slide; "just a pause" adding that "the long-term is still extremely positive."
In fact, of his firm's 3-pronged proprietary sentiment gauging tool, Hays says his monetary indicator and valuation indicators are both still extremely powerful, while the third, psychology, has slipped from the most bullish to medium bullish in the past few weeks. If you examine the "three warriors" as he calls them you start to get a handle on Hays bullish belief system.
"We have huge liquidity," the former NASA engineer says in the attached clip. "When you have that fuel sitting around it will be used." Add to that ''extremely cheap valuations" and you're left with a market that will soon be "rested and ready to go again."Read More »from Bull Market Is Taking a Pause: Don Hays