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Sunday, October 10, 2010

Market Thought... still giddy

The thesis of the Market Thought post 'giddy', imo, is playing out.

Thinking a few steps ahead, a scenario where I will look purchase SPY puts will be when the SP500 is around 1200 via the weekly resistance. I am also looking at the VIX/SP500 overlay as confirmation. As the blue (vix) line approaches the red dotted horizontal line, it would indicate to me to add protection as complacency w/respect to this rally would be setting in.

Side note, food for thought: If Oracle is trying to be like IBM, then Oracle acknowledges IBM as a leader. If IBM is a leader the stock deserves a premium valuation, as IBM is years ahead of Oracle (especially in hardware/software optimization). Oracle has a forward PE of 12.27. IBM has a forward PE of 11.22. If IBM is the leader, it deserves the premium. I think the forward PE of both companies are too low, but IBM has earned the higher multiple over Oracle. Which means IBM's stock is still inexpensive. (Even though IBM will grow EPS approx. 15% yr-over-yr until 2015, which makes IBM still inexpensive relative to its own growth.)

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