Trahane presented a variation of Doug Cliggott’s discussion (“Then and Now“). Cliggot looked at the differences between today and 20 years ago. Trahane compared the current market to March 2003:
1) Technically, the market was very oversold 1 year ago. Today, its no longer oversold and is actually overbought;
2) Valuation was compelling a year ago. There are far fewer compelling stock valuations today;
3) Equity Cycles were at a post-bubble low, with an expectation that the market was primed to go vertical. It did, and we should now expect (at best) a sideways market for some time (Note: This is consistent with the work we’ve done on post bubble environments — see 3 Bubbles);
4) Economic data was at cycle lows 1 year ago. Today, the ISM just hit a 20 year high — and then rolled over. From a contrarian perspective, you want to buy when the market when its hated, not loved;
5) Lastly, Trahane looks for a rotation form smaller caps to larger ones, from high Beta to more stable stocks, and from speculative issues, to quality, profitable, dividend paying firms (sound familiar?)
I do not see anything in this list to disagree with. Its always intriguing when different methodologies and time frames arrive at similar conclusions.
My expectations are for a few more weeks (or even months) of consolidation, and then another leg up into the fall — and that may well be it for this cycle. We’ll obviously have a better read as more data becomes available.
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.