Summary
- The market dropped because many stocks were fully valued. Many stocks have now corrected.
- Basic macros: GDP growth and normal yield curve are positives.
- Technicals have weakened but still appear to support the bull case.
- Investors should not panic and assess both fundamentals and technicals before changing their views significantly.
- The recent drop is an opportunity to get long.
The media and many investors went into panic mode as the market plunged after gapping down for three days in a row. I believe the correction was no surprise based on valuations. Technicals still remain bullish and have triggered a buy signal. See my previous article which shows the 2 simple yet powerful charts I use to look at the technical big picture.
At the end of July, in my free monthly letter, I said that:
…investors should reduce their potential profit expectations to say the least. This is not based on some theoretical model but on the fact that many stocks are fully valued.
I pointed out how I thought Apple (NASDAQ:AAPL), Anthem (NYSE:ATHM), and Valero (NYSE:VLO) were fully valued based on historical multiples and that I had sold my positions in those stocks.
To read the entire article go to: S&P 500 Still In A Bull Market
