(snip)"Martin Zweig once said that he would follow a Ouija board if it worked historically. I wouldn't. The reason is that if you're investing people's retirement wealth, college funds, or long-term savings, you'd better be sure you know exactly why what you are doing ought to work over the long-term. Because if you're just using a Ouija board, and the market starts going against you for some period of time, you're stuck – either you continue to follow something when you have no idea why it should work in the first place, or now you've got to find something else that works even though you don't understand why. In the end, you'll have neither confidence nor discipline."(snip)
Hussman's point of course is that traditional stock market indicators work until they suddenly don't work.
much more importantly ...
(snip)"Jim Stack of Investech notes that the current bull market, at 4.2 years in duration, is unusually mature from a historical perspective. He notes, “Only 4 bull markets over the past 75 years had life spans which exceeded the current one.” Those included 1949 (which began at a price/peak earnings multiple of 6), 1974, 1982 (both which began at multiples of 7), and 1990 (which began at a multiple of 11 and ended in a hypervalued frenzy at nearly 34 times peak earnings). The current advance began at a multiple of 16, so even from the beginning we had less room for valuations to expand, compared with those unusually long bulls. And as noted below, valuations have now moved far higher (on the basis of a broad range of fundamentals) than current earnings would lead investors to believe.
Of course, that's part of the difficulty here. As long as investors perceive valuations to be acceptable, there is no compelling reason why the actual facts should get in their way over the short-term. That allows for the possibility that the current speculative blowoff will continue further. The implications for long-term returns remain daunting, but over the short-term, perception is reality.
Still, even from a short-term perspective, it makes little sense to “chase” the market here. Even any speculative positions investors contemplate would be best executed on a short-term market decline that clears the current overbought condition of the market.
Below, I've displayed a monthly chart of the S&P 500 going back to 1994. The chart also includes a set of “Bollinger Bands,” which form an envelope around the 20-month moving average.
Though I don't follow “chart patterns,” I do find that various tools like Bollinger bands can help to improve our trade execution in the day-to-day management of the Funds. They also help in maintaining investment discipline."(snip)
^^^ as always, a picture is worth 1000 words !




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