You only get to witness a tear your face off rally every 10 years or so – the Dot Com Bubble is an example.
Here are where the Valuation measures I track now stand:
| Market Valuations: | Current | Mean | Delta |
| Shiller’s 10 Year PE Ratio: | 28 | 16.71 | 67.56% |
| Trailing 12 Month PE Ratio: | 26.06 | 15.63 | 66.73% |
| Tobin’s Q Ratio: | 1.04 | 0.68 | 52.94% |
| Market Cap to GDP: | 126.4 | 90.00 | 40.44% |
| Morningstar’s Fair Value: | 1.02 | 0.90 | 13.97% |
| Price to Sales: | 1.99 | 1.44 | 38.19% |
| Average Overvaluation: | 46.64% |
This should give you some context about what you can expect from investment returns over the next 10 years – probably not much. You also must ask if you can handle even a simple reversion to the average – which would indicate a 46% correction in equity values.
So here are this week’s numbers – nothing but green!
The following table is based on the Z Option Market Analysis Tool – which determines if a market is trending by assigning a trending score from -3 to +3. This helps us keep our trading with the trend.
| Symbol | Description | Short Term Trend | Medium Term Trend |
| $DJI | Dow Jones Industrial Average | 3 | 3 |
| SPX | S&P 500 INDEX | 3 | 3 |
| RUT | RUSSELL 2000 INDEX | 3 | 3 |
| NDX | NASDAQ-100 INDEX INDEX | 3 | 3 |
| VIX | CBOE MARKET VOLATILITY INDEX | -1 | -3 |
| /ZB[H7] | 30-Year U.S. Treasury Bond Futures,ETH | -3 | -3 |
| /ZN[H7] | 10-Year U.S. Treasury Note Futures,ETH | -3 | -3 |
| /GC[G7] | Gold Futures, ETH | -3 | -3 |
| /CL[F7] | Light Sweet Crude Oil Futures,ETH | 1 | 3 |
| /DX[H7] | US Dollar Index Futures | 3 | 3 |
| $DJT | Dow Jones Transportation Average | 3 | 3 |
| XLK | SELECT SECTOR SPDR TRUST TECHNOLOGY SELECT INDEX | 3 | 3 |
| XLI | SELECT SECTOR SPDR TRUST INDUSTRIAL SELECT INDEX | 3 | 3 |
| XLY | SELECT SECTOR SPDR TRUST CONSUMER DIS SELECT INDEX | 3 | 3 |
| XLB | SELECT SECTOR SPDR TRUST MATERIALS SELECT SEC INDEX | 3 | 3 |
| XLE | SELECT SECTOR SPDR TRUST ENERGY SELECT INDEX | 3 | 3 |
| XLP | SELECT SECTOR SPDR TRUST CONSUMER STAPLES INDEX | 3 | 2 |
| XLV | SELECT SECTOR SPDR TRUST HEALTH CARE SELECT INDEX | 3 | 2 |
| XLU | SELECT SECTOR SPDR TRUST UTILITIES SELECT INDEX | 3 | 2 |
| XLF | SELECT SECTOR SPDR TRUST FINANCIAL SELECT SECTOR FUND | 3 | 3 |
Any market showing a 3 or a -3 is trending strongly – and should be factored into any options strategy you are contemplating.
Feel like a broken record – Bonds and Gold continue their downward move – but everything else is working.
Extra – With interest rates on the rise – Bloomberg has a timely article about your debt:
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