The S&P500 index is currently in a bear flag. Indecision and uncertainty about Trump's trade war and overvaluation of US equities has caused this pattern to emerge. We are at the top of the bear flag, an ideal time to short or buy put options on the SPY or S&P500 futures. Recent optimism about a resolution to the trade war is unfounded. I don't think Trump and Xi will agree on forced technology transfer and open markets in China. Xi has too much to loose if he gives in to Trump's demands. Xi would prefer to keep stalling the negotiations until the next presidential election. China needs forced technology transfer from US companies. China has built an economy based on it and I don't think will agree to ending the arrangement. This market could trade inside the rectangle for a while yet before it breaks down to the downside. Short it at the top of the rectangle and hold and wait. A severe drop to the downside could happen at any time, maybe caused by a further increase in tariffs or economic conditions deteriorating confirming the inverted yield curve. The inverted yield curve has confirmed most recessions in the past and should be right again now. With Germany and the UK entering recessionary conditions, this could spill over into the US.
On a DCF valuation using 4.5% growth rate in earnings and 8.2% discount rate I get an S&P500 valuation of 2700. If a severe slowdown occurs, this DCF valuation could become lower. I think the S&P500 is overvalued now, further reason to stay short. On the Nasdaq, there are lots of companies selling for PE of 100 or more. Ripe for a drop in share price. You could also short the Nasdaq100 index.
On a DCF valuation using 4.5% growth rate in earnings and 8.2% discount rate I get an S&P500 valuation of 2700. If a severe slowdown occurs, this DCF valuation could become lower. I think the S&P500 is overvalued now, further reason to stay short. On the Nasdaq, there are lots of companies selling for PE of 100 or more. Ripe for a drop in share price. You could also short the Nasdaq100 index.