You say you are “not impressed with the Dow high” and that only 10 of the 30 are above January levels. You then go on to say that this supports a hypothesis that the market is weak. However, what if you’re wrong and it means the market still has room to rise without being overvalued from a historic perspective?
The current rally is pretty broad. Specific indexes aren’t the only thing you can look at. Just look at your mutual fund performance. My small to midcap fund is up 3% over the last month, and my mid to large cap fund is up 4% over the last month. These are broader than the Dow or S&P.
Finally, lots of folks use individual sectors as leading indicators, with varying degrees of success. Some of the biggies are keeping an eye on retail, consumer cyclicals, and healthcare. Watching transport and making inferences not as common. Maybe the flight from a predictable commodity sector like transport into other things shows optimism in more complex sectors and the market as a whole. Maybe it doesn’t mean anything.
Finally, I’m wondering if you could comment further on the timing of your flight to inverse indexes. Why did you do it before the bulk of the summer earnings reports? Do you know something we don’t? Are you planning to make 10% this month by getting in early on the Armageddon? (I say that with tongue in cheek.)
