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Sunday, September 19, 2010

Market Thought... same thesis

My thesis still has not changed from previous market thought post 'infection point, maybe'. There are far too many indications that suggest the market needs to consolidate. Hence I did not close out any of my market protection. The SP500 continues to reflect this by dancing with its resistance.

However I strongly believe the market players are slowly realizing the fact that a double dip is not going to take place. With this very important fact descending upon them, they know the market multiple is too low. The multiple should be around 14-15. If we assume the estimate of $87 per share for the SP500 is accurate, then a 14-15 multiple puts the SP500 between 1218-to-1305. (For the record, based on the macro-economic environment I am seeing, after this consensus estimate was issued, I think it is too low.)

The market will rally to the weekly 200/320 SMA.

The one indication I really like, that suggests such a market realization by the big boys is the LQD (corporate bond fund, which I think is a mood for the bond market in general). It looks toppy, and wants to roll over. After it rolls over, that cash will be put to work within inexpensive multi-nationals with great balance sheets, steady earnings. (ie IBM, MSFT, AAPL, GOOG, GS, F... the list goes on-and-on.)

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