Today's Market
by Dr Invest

If you have been following this blog, you are probably waiting for some turn-around news. For the past two years, I have been reducing my position in stocks. Others have been increasing their position in stocks as the market has climbed to new highs. I am reminded that "I would rather be out of the market wishing I was in, than to be in the market wishing I was out." I have missed a "big move" in the market. But with a market that is manipulated by the Federal Reserve and the over exuberance of investors pushing the market ever higher, I have not felt that the risk is worth the reward.

In the previous article, I have shown you a possible trending in the market and the potential for a dramatic collapse. Below is noted "DOUBLE TOP" patterns. The retreat from the high in the S&P is a likely indicator of an impending down trend. I don't believe that "government stimulus" will prevent the coming decline and could aggravate a healthy return to growth.

Buffet has complained about it being hard to find things to buy. The Darden Restaurant chain (Olive Garden, Red Lobster, and Longhorn Steakhouse) is cutting employees and trimming budgets. JC Penny continues in a decline. The government reminds us that unemployment is declining, but companies are talking about letting employees go. On one side there is the declaration of a STRONG & VIABLE MARKET, yet numerous companies are talking about part-time employees and letting full-time employees go. CNBC reported today:

Gina Martin Adams is sticking to her guns.  The Wells Fargo strategist has been bearish on stocks all year, even as she watched the S&P 500 (^GSPC) add 21 percent. And on Thursday's " Futures Now ," Adams reiterated her call that the index would close out the year at 1,440.

"Our target is based on fundamentals," Adams insisted. "We're basing our target on typical valuation measures, given the level of interest rates and also on earnings forecasts. And that's why our target is relatively low."

In fact, "low" is somewhat of an understatement. Adams' target implies that the market will drop 16 percent in little more than three months, erasing everything that stocks gained after the year's first day of trading. This makes her one of the lone bears on the Street.

So what could produce such a dismal fourth quarter for stocks? First of all, Adams is highly skeptical about the rally that the market has enjoyed thus far. "It's all about emotion at this point. The entirety of the S&P 500's increase this year has come via the multiple," Adams said. "It's been simply through the amount that investors are willing to bid up the value of the future earnings stream."

Indeed, the S&P 500's price-earnings multiple has risen from 17 on Jan. 1 to nearly 20. That means the market has largely been rising due to investors' willingness to pay more for those earnings.

I am not going to print the entire article on my blog, but her voice is not a lone voice. She expects this downtrend to unfold in the next three months. 

I have no real advice to give, other than find a competent financial adviser you can trust. Adams is suggesting a 16% decrease that would erase any profits your portfolio has gained this year. I am suggesting that a decrease would bring a SELLING PANIC, pushing the S&P down even lower. 

(Note: the above article is for entertainment purposes only and not to be used as financial advice.)