Extreme Stock Market Valuations – Trend Following
Stock valuations are at highs only seen since 1929, 2000 and 2007 yet the stock market still is churning upwards. Breadth is weak and not all stocks are participating. There are those who believe, maybe rightly or wrongly that Trump’s infrastructure projects, deregulation and tax cuts will propel the stock market even higher.
As a trend follower, I know anything can happen and not trading my opinions. Actually I am long the Dow, Singapore Index and the CAC. These are trades, I would have not preferred taking but I believe in my system more than my opinions. I have trailing stops and who knows what can happen.
If I tried to use common sense, I see real estate bubbles..student loan bubbles…a subprime auto bubble and an interest rate the lowest in history. To me, that is rather toxic.
However when one looks at a parabolic move, it is virtually impossible to call a top. That is why I am trend following. I know, I will be available if the move continues…I know if the move does not continue, I will give back my profit and might even end up with some type of loss…hopefully a small one. I should not have a 50% draw down as many experienced in 2002….or 2008….or even worse in 1929.
Trend following is taking trades against your own personal opinions. I have learned my opinions do not mean all that much. Nice to be humble.
Disclosure:The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I may hold ...
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