Hope you’re weekend was a good one. We’re back at it for another new
trading week, and based on what happened late last week, we could be in
for more volatility this week. The question now becomes, just how much
more downside is left before these markets resume their trading trends
higher? One thing’s for sure, one of the biggest reasons we’re seeing
what we’re seeing now is because a large number of short sellers had
already thrown in the towel. That’s just the way bull markets love to
work.
Provided below is an isolated daily chart of the NASDAQ Composite, and as you can see, we’re already looking at our third consecutive day lower following last Wednesday’s new all-time high. As a matter of fact, we’re seeing a 4-1 advance/decline ratio this morning in favor of decliners to kick off the day. That’s pretty ugly. However, how many times have we seen this before, only to see the markets somehow find a way to move higher when it’s all said and done?
We do still suspect, however, there’s not all that much upside left before we finally get that selloff we’ve been looking for. These markets have just gotten a little too extended for our liking considering the recent thrusting pattern higher, especially since there hasn’t been any sort of significant breather along the way yet. It’s bound to happen, and maybe that’s what we’re starting to get now.
To boot, based on the recent quarterly earnings season, which is pretty much over now, the S&P 500 is now trading around a trailing P/E of just over 22, and a forward P/E of over 18. It’s not horrible, but it is a little lofty no matter how you slice it. We’ll also note earnings across the board did come in about 6.6% shy of estimates, so wouldn’t at least a 6% pullback be in order? We’ll see.
The bottom line is what we’re seeing right now is actually a very welcomed event, despite the short-term pain associated with it, because at the end of the day it’s a marathon not a sprint. Meaning, you can take all of your favorite companies, and look to add to those ideas in the event the markets continue lower.
It’s clearly not time to start adding just yet, but depending on when and where these markets finally do decide to settle, it’s definitely going to be a strategy we’ll want to employ. Like we said Friday, we haven’t been getting too overly aggressive in recent weeks, and as you can see over the last few days it was for very good reason.
There’s still plenty of value out there on an individual company basis, and although we continue to strongly believe there’s still plenty more upside ahead on a long-term basis, now isn’t the time to be diving in to the long side with both feet. Not yet anyway, so let’s continue to exercise a little patience, stick with what we’ve got for the time being, and look to add more when the time is right.
Provided below is an isolated daily chart of the NASDAQ Composite, and as you can see, we’re already looking at our third consecutive day lower following last Wednesday’s new all-time high. As a matter of fact, we’re seeing a 4-1 advance/decline ratio this morning in favor of decliners to kick off the day. That’s pretty ugly. However, how many times have we seen this before, only to see the markets somehow find a way to move higher when it’s all said and done?
We do still suspect, however, there’s not all that much upside left before we finally get that selloff we’ve been looking for. These markets have just gotten a little too extended for our liking considering the recent thrusting pattern higher, especially since there hasn’t been any sort of significant breather along the way yet. It’s bound to happen, and maybe that’s what we’re starting to get now.
To boot, based on the recent quarterly earnings season, which is pretty much over now, the S&P 500 is now trading around a trailing P/E of just over 22, and a forward P/E of over 18. It’s not horrible, but it is a little lofty no matter how you slice it. We’ll also note earnings across the board did come in about 6.6% shy of estimates, so wouldn’t at least a 6% pullback be in order? We’ll see.
The bottom line is what we’re seeing right now is actually a very welcomed event, despite the short-term pain associated with it, because at the end of the day it’s a marathon not a sprint. Meaning, you can take all of your favorite companies, and look to add to those ideas in the event the markets continue lower.
It’s clearly not time to start adding just yet, but depending on when and where these markets finally do decide to settle, it’s definitely going to be a strategy we’ll want to employ. Like we said Friday, we haven’t been getting too overly aggressive in recent weeks, and as you can see over the last few days it was for very good reason.
There’s still plenty of value out there on an individual company basis, and although we continue to strongly believe there’s still plenty more upside ahead on a long-term basis, now isn’t the time to be diving in to the long side with both feet. Not yet anyway, so let’s continue to exercise a little patience, stick with what we’ve got for the time being, and look to add more when the time is right.
No comments:
Post a Comment