Monday, August 22, 2016

Majority Expects #Stocks To Plunge Based On Stretched Valuation

The computer says valuations are NOT expensive.  Fortunately for the minority, few are listening to computers (the message of the market).  The following is taken from the latest Review of the Dividend Yield Cycle.

DYC1 and DYC2, the more volatile dividend cycles, not only refute the bears' bubble claims but also suggest that stocks are closer to oversold than overbought (chart 1). Forecasts of a 4,000 point decline in the DOW, growing risk of a major top, or sell everything! will be forgotten when extreme negative concentration from DYC1 to DYC4 tighten risk management and/or trigger short positions against what will likely be raging optimism towards US Stocks by the majority (chart 1 and 2).

Headline: The stage is set for the next 10% plunge in stocks

The stock market (^GSPC) continues to trend higher as earnings growth remains lackluster. This has caused valuations to get very expensive, signaling a stock market that’s becoming increasingly due for a sharp sell-off.

Everyone is flagging this anxiety-inducing pattern, and yet the market continues to rally arguably nonsensically.



Market-driven money flow, trend, and intermarket analysis is provided by an Insights key.