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Stock market optimism is too high. Are You Ready?

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Most market participants buy and sell at exactly the wrong time.  If you watch CNBC there was a parade of bulls in 2007 predicting DOW 20,000 within a year only to be replaced by a parade of bears predicting the end of the world at 2009 bottom. Simple human psychology.

Why is this important? Well, I am glad you have asked. 

As of early August 2013, various metrics measuring/showing investor sentiment indicate an optimistic extreme among market participants.  In fact, some optimistic views expressed wouldn’t be out of place on a space ship heading to Mars.

“This is a buying opportunity of a lifetime, this is the most powerful bull market since the World War II and there is a lot more upside to come” – some guy from a mental asylum on CNBC, August 6th. 

Since then the Dow dropped about 800 points, posting the worst weekly performance since the start of 2013. Yet, that’s just a speed bump for the eternal optimists.

On August 16, a Wharton professor of finance told CNBC, “I certainly wouldn’t throw in the towel. I’m still projecting Dow 16,000 to 17,000 by year end.”  

So, is this a great buying opportunity as most pundits on CNBC and in financial media claim? Are we on our way to DOW 20,000?

HELL NO SON. Get your head out of your ass and start thinking straight.  Here are just a few  facts you might want to consider……

  • Investor sentiment is way too high. Some indicators claim it is at historic levels of extreme kind of high.
  • The US Stock market is overpriced at these levels.
  • The is a lot of emerging market money flooding into the US Stock market looking for safety. This usually happens at exactly the wrong time.  There is no such thing as safety.
  • There is no fundamental case for the US stock market to go to Dow 17 or 20,000. Once again, it is extremely overpriced now.
  • The fundamental business environment for most US Corporation is starting to deteriorate substantially.
  • Interest rates are going higher and the FED has done everything they could up to now. No further stimulus will help and any additional stimulus will be marginal at best.  There is no stimulus velocity left in the system.
  • Technical picture is flashing warning signs and showing  that there is a high probability that the stock market is about to break down.
  • My timing work indicates that the bull run that started at 2009 bottom is coming to an end. The stock market must decline into its 2016 bottom. There is no way to stop the law of nature.

I can go on for another 20 or so points, but you get the idea.  You have been warned. Start positioning yourself for an upcoming decline now.