Today’s wild ride will be blamed on Yellen’s testimony today as her words spooked some investors. Small cap stocks were hit the hardest followed by the NASDAQ, as volume swelled across the board. The increase volume coupled with the losses on the NASDAQ gives a day of distribution for the NASDAQ. The bright spot of the session was certainly the intraday support the indexes received when it appeared the market was about to cave. We were on the verge of losing this uptrend, but we were able to hang on. Caution is certainly warranted, but keeping with your plan is the smartest thing you can do. We still remain hanging onto this uptrend.
Taking a look at our big boy leading stocks all of them found quite the support today. FB filled Monday’s gap and was able to close in the upper half of its range today; a bullish sign for the stock going forward. TSLA, one of our leader stocks was not very lucky today closing near its session lows. Volume was lower than yesterday’s session perhaps a bright spot on today’s session for those who are long. You should be getting into the leading stocks and they will tell you the health of the market. If your stocks continue to send you sell signals it is a sign the overall market is not very healthy. One stock out of a handful not acting well is not a reason to panic. Stick with your rules by staying disciplined in this market.
Yellen’s testimony was quite interesting. While we didn’t pay too much attention to it we did find her valuation comments rather amusing. Trailing Twelve Month (TTM) price-to-earnings ratio on the S&P 500 is nearly 20 times earnings. Yet this is not frothy? Everyone wants to look at forward earnings, but it is not like forward PE is sub 13. Valuations won’t matter until a market correction. Arguing over stocks’ valuations is simply meant for cocktail chit chat. Still, it is funny given the valuation metrics the Central Banker did not mention from a historical perspective we are in the upper echelon.
Overvalued or not we are in a shaky up trend where we’ll need to see this market power forward if this thing has any chance of hitting fresh new highs. Stick to the plan.
