Monday, January 13, 2014

A New Bear Market?

Is the stock market headed to another bear market? ($SPY)

Stocks, no longer cheap, hit the skids

Goldman Sachs reminded Wall Street that stocks aren't cheap anymore.

It may be just a coincidence, but the Dow Jones industrial average suffered a drop of nearly 180 points on Monday, its biggest point drop since late September, on the same day the banking giant said its historical research shows the broad U.S. stock market's current valuation is "lofty by almost any measure."

Here we are.  We’ve been told that investor sentiment is too bullish, so stocks must come down.  We’ve been told that stock valuations are too high, so stocks must come down.  We’ve been told that whenever there is froth in the market, where a biotech stocks surges over 500% in two days (I’m looking at you, $ICPT - Intercept), stocks must come down.

image And today, stocks came down.  It was ugly, too.  Some of the leading names were up early, only to be sold off hard.  Was that you, $BIIB – Biogen?

I don’t know any more than you do if the market is heading into a new bear market, a stock market correction, or if today was a one-day wonder.  The SP500 nears the 50dma, which I suspect would be where the bulls try to make a stand.  I do think it is time to make sure that profits be kept and that losses be cut short.

BTFD may not work just yet!

I am currently about 30% in cash.  (Maybe I was one of the last folks in the pool!)

I suspect that I will be raising cash should the market drop below the 50dma, and wait for a better day. 

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