Definitely doing some damage to 90 COMPX trendline. The plus is that volume appears to be declining on the down moves still, a trend over the last 6-7 weeks that appears to be continuing. New highs/new lows aren't deteriorating significantly (49/59), and breadth isn't awful for a 3% down day (5-3 negative). They may be dumping the big names, but I'm not sure if the selling is going much beyond that. Sellers don't seem to have much conviction here, but neither do buyers.
On the other hand, I agree with you on future returns more in line with historic norms. The 90 trendline represents historical returns of about 30% annually, so I'm not sure how much longer that trend can be sustained, if it holds here.
The problem with NDX/COMPX valuations is the extraordinary number of companies that have gone public with little or no earnings and been awarded huge valuations in the process. A better proxy is CSCO, which I have coming into buying range at 25 1/4, not much more than $1 from here. That is a valuation at which investors have supported the stock in the 11 years it's been publicly traded. CSCO overshot the similar number ($72) to the upside by 15%, so a 15% overshoot to the downside isn't out of the question. I have absolute maximum downside on CSCO of $21.60, using 30 times July's estimates of 72 cents, the old PEG ratio, assuming Chambers can hit the low end of his oft-stated 30%-50% long-term growth estimates. So there is some "value" in the NDX at these levels, and as some of you know, I was a heavy buyer of PC-related stocks on January 2 using various valuation techniques. Not quite at those levels in the telecom equipment sector yet, but close.
The Dow's inability to close above 11,000 is baffling, especially given that a break of flat-line resistance tested this often is more or less a given. Amazing that sellers haven't run out of overhead supply yet.
That's all from here; was out all morning and just got in. |
