No doubt, it is a market of stocks and not simply a stock market as the rising tide over the last five months has not lifted all boats equally, which should provide comfort to those concerned about the supposedly rich valuation of the “market.” True, we respect that the current P/E ratio for the S&P 500 of 26.4 is on the high end of the historical range, but we can’t forget that interest rates are microscopic today,… and that there is a big difference in how one should look at equity prices when yields on cash are close to zero as they are today, versus 500 (5.0%) or 600 (6.0%) basis points as they were when the S&P 500 was arguably expensively valued back in 2000 and 2007. We continue to believe that Value will recapture its former glory.
– John Buckingham, The Prudent Speculator, www.theprudentspeculator.com, 877-817-4394, August 24, 2020
Awaiting Two Catalysts
Investors are waiting for a resolution to the next two major catalysts on the horizon for stocks: 1) The passing of a substantive stimulus deal by Congress, and 2) A game-changing vaccine/therapeutic to combat the coronavirus.
On Wednesday, the S&P 500 officially extricated itself from the shortest bear market in history by eclipsing the previous Feb. 19 high. This move is remarkable, especially given the near-30% plunge in the S&P 500 from its Feb. 19 high to its March 23 low.
So, given that the breach of the former high (and therefore the official end to the COVID-19 bear market), I think it is safe to say that the smart money does expect positive news on both of those two aforementioned major catalysts.
– Jim Woods, Successful Investing, CustomerService@JimWoodsInvesting.com, 1-800-211-4766, August 21, 2020
Looking for Sell Signals
There are some potential sell signals setting up, and we will be trading them if they are confirmed. However, one must remember that the $SPX chart is still positive, and that is the most important indicator. Sell signals from other indicators can come and go, but if the $SPX chart does not break support (3200, in this case), then the price trend will remain higher. So, there are some cracks appearing in the dam, and while it’s not time for panic, you better have Hans Brinker on speed dial.
– Lawrence G. McMillan, The Option Strategist, optionstrategist.com, 973-328-1303, August 21, 2020