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Market Short-Term Overbought, Long-Term Overvalued!

  • Written by Syndicated Publisher No Comments Comments
    June 11, 2014

    The market has spiked higher, most indexes at new record highs.

    That has the market short-term overbought again, above 50-day moving averages, and above trendline support, making at least a short-term pullback quite likely.

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    A pullback to its 50-day m.a. by the S&P 500 would amount to only 4%, to the trendline support only 6%.

    However, the market is also long-term overvalued, by 51% according to the Shiller CAPE 10 P/E ratio, by 85% according to the Q-Ratio, and by 30% or so according to Warren Buffet’s favored measurement, market-cap to GDP.  

    That’s not a good combination, short-term so overbought, long-term so overvalued.

    You could add in a few other concerns.

    Strong markets are usually the result of strong economies and rising corporate earnings.

    Instead, we have an already anemic economy that slowed significantly in the winter months, and is not seeing many signs of the expected spring recovery.

    And corporate profits, the normal driving force of the market, although beating Wall Street’s estimates, declined 9.8% in the 1st quarter according to the Bureau of Economic Analysis.

    Our technical indicators have not triggered a sell signal, remaining neutral.

    But if investors do not feel the need to raise cash and take other steps to preserve capital now, when would they ever?

    To read my weekend newspaper column click here:   The Truth About the Jobs Report and the Economy 

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

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