It was a frustrating week. I got
hit on both side, both by the big post-Fed rally on Thursday, and the
sharp decline on Friday. Lost a little over 2% for the week. Boeing
continued to be a problem as it made a new monthly low. The booming
rally in some stocks, such as Apple had me scrambling. I kept
rebalancing back to delta neutral. As volatility increased that
didn’t work out.
Several pieces of a market top are now in
place. The inverted yield curve, poor relative strength in the
transports, lots of big IPOs coming to market, extended valuations as
measured by CAPE and GDP to market cap (Schiller PE10 and the Buffett
indicator). The one missing piece for a major top is popular
sentiment. AAII weekly sentiment is still middle of the range. Stock
market chatter at the local level seems muted.
A lot of birds
are chirping online about the imminent recession. The inverted yield
curve has a lot of people looking for a market down turn. This and the relatively good economy are what bulls can hang on to.
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