I
spent the day prepping for the hurricane including moving a sailboat with
friends so this was not a day to watch that market. It was a good day to short if you were smart
enough to go short near the top of this morning’s bounce. I may not post much next week depending on the status of electrical power after the storm.
As
you know I like to quote John Hussman, PhD.
He is a proponent of the CAPE method of valuing stocks. CAPE is an acronym for a modified price
earnings ratio based on a 10-yr earnings average adjusted for inflation. I saw a report yesterday where some were
suggesting (in another study) that the CAPE is too bearish now because the
10-yr avg. includes 2-significant downturns of low earnings. If I can find the reference I’ll post more on
it later.
The
key S&P 500 level is around the previous 1119 low. We have visited that general vicinity 4-times
over the last 3-weeks. While it is my
guess that the 1119 level will not hold and we will see further declines from
that level, that’s just what I think. As
the famous trader said, “Trade what you see; not what you think.” We’ll have to see if it holds there with
improving market internals. The
internals were so bad on 8 August when we made the 1119 low it shouldn’t be
hard to improve on them. The trouble is,
even if we have a successful test we might fail to hold that level in the
coming weeks. So if we have a successful
test, the question may be, “Do you feel lucky; well do ‘ya, Punk?”
NTSM
is HOLD today.
I sold on the 27 July sell signal at S&P 500 1301 and I am
defensively positioned with only a small amount of my portfolio invested in
stocks. (Zero stocks in the 401k.)
