I haven’t posted for a while because nothing has really happened.  The Dow dropped a bit and then came right back up to the big red line from my last post.  And stayed there.  And then today I read this: an article about Advance Decline (A/D) lines and how they can help to predict long term tops.  Sigh…   (The author, Kevin Marder, writes one of the newsletters I read.)  His article is titled the same as mine, but without the question mark.  Again, sigh…

Combine this with my Big-Red-line-different-type-of-technical-analysis and this might just be a big ol’ top.  And I thought the economy was supposed to be getting better.  Now, he does note in his article that that his A/D trigger occurred in ’98, just before the big runup to 2000, so it’s possible that the market will break through the red line and then begin a new pattern, outside of the Big-Red-Line pattern.  It’s also possible that there’s a really major trend line flowing underneath the pattern we’re currently in, which would mean that we might not crash to Dow 6000 if we were to top right now.

My best guess…stocks are not really overvalued at the moment like they were massively in 2007.  With interest rates as low as they are, one could almost argue they’re undervalued.  So we’re not really in a bubble…I think people are pretty wary of our last two bubbles so PE ratios aren’t inflating like mad.  I also don’t think that we’re going to return to boom times anytime soon, because our demographics simply won’t allow for it (see previous posts).  The Fed is fighting  deflation with everything they’ve got…so instead of a massive depression, we got a major recession…and now I think we’re likely to economically just muddle along for some time with, perhaps, a medium depth crash somewhere in the near future.

I’m 100% cash at the moment…and frankly I’ve done very poorly this year relative to the market as a whole.  I’ve been re-evaluating my strategy (read: sucking on my thumb) and have stepped away for a bit to attempt to understand why.

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