Over Bought Stock Market

Friday’s trading gave us little in the way of new information but the stock market remains overbought and should be avoided.  The complacency and bullishness is noteworthy.  With the major indexes, Dow Industrials, SP500 and the NASDAQ COMP, all below their highs for the year, the bullishness seems a bit unfounded. The media has created a bull market going into the end of the year.  Is that even possible?  Since when did the media become the experts on the stock market?  

Please measure your exposure to the market and determine if it is the appropriate level.  We have the worst of both worlds going on here.  The media is convincing people that they better get on this Santa Claus bus before it’s too late and people are doing it.  We believe this is the worst time to be exposed to stock market risk.

The biggest reason to take shelter is that market leadership has disappeared. Yes, recently some of the financial stocks have stepped up a little bit but not all.  The big leaders, the oil and housing sectors, have disappeared.  

Speaking of market leadership, Erick had pointed out an article in the WSJ that indicated there were some value stocks that we might be able to pay some attention to given a good opportunity might arise.  I looked at those stocks and found one, JEF, an investment brokerage company, to be of some interest.  The problem is that it has jumped a bit, along with several other brokerage firms and we should look for a better price at this point.  I believe that better prices are just around the corner for many stocks.

I’m not going to mention the other stocks because they didn’t look as interesting until their price gets a little higher if you can believe that.  I think they have run into some resistance here at these levels and could also be purchased with a decent pullback.  We will continue to watch them for a while as we would like to be prepared for some good stocks if we ever could find a good low to trade from.

There are a couple of things to watch for this week:  Bernanke is scheduled to appear before the Senate confirmation hearings, both the CPI and the PPI come out this week, as well as Retail Sales.  Since nobody eats or uses energy, the CPI and PPI are only considered without them (how preposterous) and they are both expected to rise 0.2%.

I think you should take a quick look at the True Contrarian link to the left.  He updated on Sunday evening and provides some food for thought for the current environment.  We both think the gold complex is too pricey but his thoughts on the stock market are worth reading.  

Dow Industrials:  10,686.04   +45.94
RYVNX:  19.42
TLT:  89.49  (bond market was closed on Friday)
BGEIX:  12.96