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Strategies & Market Trends : Waiting for the big Kahuna
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To: William H Huebl who wrote (48832)10/13/2000 11:28:24 AM
From: Mark Adams  Read Replies (1) of 94695
 
OK- I understand you are following your rules- but look at the foundation of the SCYR. Is there possibility that it has been distorted by a small basket of stocks?

Didn't I read that Tech now represents 35% of the market cap of S&P? Tech tends to be low yield as a result of constant reinvestment? Also, you have the tax law changes favoring capital gains.

I don't agree with IBM increasing financial leverage to buy back shares- and I don't own any IBM. But I have to wonder if you played with SCYR using the middle 33% of the S&P, if your numbers would change.

I also have to wonder what you'd find if you ran TA against sector indexes, if you could identify sectors under accumulation. Mutual funds need to stay invested, and have to find shelter somewhere.

What about using the Wilshire 5000, which I understand more accurately represents the entire market? Historical yield ration on that index would seem to side step the index changes that might invalidate previous valid signals.

I think this indicator is painting with too broad of a brush. "Markets are overvalued" is incorrect, IMO. Too general. Tech stocks trading at PEs in excess of 100 are overvalued, IMO. Dow stocks, ramped to PE's of 30-40 due in part to index funds and closet indexing are overvalued.

Meanwhile, a good portion of the market trades at PE's of 10-15- granted many are cyclical and possible at the peak earnings if we get a hard landing. Cash would make sense in that case, but some long positions hedge that cash against a soft landing.
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