Many pure wall street theorist used to say sell stock when RSI was near 60, and buy stock when they were near 30.......
How times have changed, you will be hard pressed to find any quality stocks near 30 RSI and every quality stock is over 60 RSI, some even higher than 70.....and nobody is worried?
Many new traders or investor are not even aware of what an oversold market looks like......they have not seen any oversold condition since 2009......when S&P 500 was @ 688.......now we are @ 2439.07, a gain of 1751 points or a gain of 255% in 8 years........31.8% gain annually vs historical average of 8%.....
The real question is ......are we near a major top like 2000......
Very few analyst are wondering about this euphoria, new all time high day after day and week after week, even month after month.......
AMZN trading @ 76.67 RSI
GOOG...................74.00
SHOP.....................73.30
Nasdaq 74.49
SOX.......................70.97
BBRY....................70.69
S&P 500...............69.56
DOW.....................64.75
This is just a sample of a very disturbing picture......
NOW.....cheerleaders will tell you it is not 2000 valuation .......where eyeballs were the metrics used...but fundamental analysis, which has lasted since birth of Wall & Broad street.....are well served by following "rules of engagement".....60 is overbought.........
Every euphoria has ended badly, not a single one has been spared since first trading days, railroads, plastic, oil, Interstate boom, Y2K....all met the same fate.....a long drawn out bear market which lasted anywhere from 5 to 7 years .......
Are we close to anything like that........
In 2000 S&P 500 peaked @ 1500+
In 2017 June we are @ 2439......a gain of 939 points or 62.6% or annualized gain of 3.68%.....well below 8% average gains.......
To get to average gain of 8% per year, we need to get to 3540 in S&P 500...which is another 1100 points away......or we should go up another 45% higher......
Normally we always overshoot.....so a 10% annualized gain is not out of question......
BUT...before we go too far, there is a very good chance of 5% pullback very soon......
Keep all this stat in your mind in any future allocation....
Good luck with your own analysis & comfort level.
BLOG does NOT give buy or sell.
Saleem
2 comments:
Hi Saleem,
Last week's recap:
Portfolio: +0.55% (YTD: +16.20%)
Winners: MJCO MU Z KBH RCL GRUB
Losers: CHK YEXT TNA ACIA
Portfolio: RCL ZYNE FB BABA MU SPLK KBH PLNT Z GRUB YEXT MJCO, cash 7.3%
Although I messed up a great opportunity with TNA, I still did ok last week. RCL and ZYNE are my big overweights for now. RCL is benefiting from increased "experience" spending, an emerging middle class in China, and very cheap valuation still. ZYNE has multiple catalysts in Q3 with mostly positive expectations, so I'm looking for a June run-up. Beyond this month, valuation seems good if trials go well given the large market opportunities in the areas they are targeting.
Stocktrader
Hi Stocktrader,
16.20% ytd is outstanding.
Last week was +.19%
Good luck with RCL and ZYNE.
Saleem
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