Michael Huang
Short

Market is Extremely Overbought Not Many Good Deals Left

AMEX:SPY   SPDR S&P 500 ETF
216 0 0
Everywhere I look I see high flying unrealistic evaluations. Just a month ago everyone was calling for a correction at levels below these. While earnings has come in pretty positive as I expected, investors and traders have still driven the prices up speculating in high flying nonsense. I find it disturbing that the few companies that are actually priced less than their probable future cash flows aren't getting the attention they deserve. Instead investors pour into companies that won't earn what they are priced for 100 years even if they grow 500% like twitter (slight exaggeration). Currently I am feeling the sudden need to go to cash and wait for better deals. I believe that a correction to $182 will make the market far more attractive than it is and is closer to a fair value than current prices. Just so you know I think the P/E is nonsense. Discounted Cash Flow is a much more reliable way to evaluate a company's worth.

The RSI is showing a market that is running out of steam and is highly overbought. Currently we are at the top of a longer term trendline so bulls don't even have much of a technical argument at the moment. The current rally may grind higher fueled by delusional fools who like to buy high and sell low until the end of the year. At the beginning of the year when fund managers decide they have had enough we could see a hard sell off hopefully to $182. The lower the better and the sooner the better. I would like to buy quality companies for a fair price. Good Luck! It's going to be a tough couple of months to trade coming up.
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