Courtesy of Doug Short.
The following graph from Ron Griess of The Chart Store shown by Barry Ritholtz yesterday at The Big Picture gives a view of market valuation compared to a historical reference:
This chart is very similar in many characteristics to a chart by Doug Short (which I have annotated) below:
Both charts suggest a bubble, which was beginning to inflate in 1997, might still have some more deflation to go through.
I expect that some will have a contrary opinion about valuation, including the low P/E ratio as prime facia evidence, especially for a time with low interest rates. So be it. Someone has to take the other side of every trade.
Disclosure: I have no shorts. My few short positions were closed August 11. I have voted 30-day bullish in the last two weeks of the Ticker Sense Market Survey. However, I will go to neutral above Dow 11,500 and bearish above 12,000. My biggest worry right now is that my trading range projection for the 12 months starting June, 2011 may be broken on the low side (10,500 Dow). I am not too worried that the top of my projected range (13,000) will be brought into play for the rest of 2011.
Happy gambling. I will stay hunkered down in defensive stocks and cash.
(c) John Lounsbury
John Lounsbury is Managing Editor and Co-founder of Global Economic Intersection. This commentary originally appeared at Seeking Alpha.
