Sunday, November 13, 2011

Cautious About Stocks (Continued)...

Though I can still find individual stocks that sell for attractive valuations based on p/e or  price to free cash flow, the widespread pessimism and oversold nature of the stock market a couple of months ago have been reversed after one of the strongest months for the stock market on record.

Two recent indicators now signal caution at least.  The put/call ratio for the S & P 500 has fallen sharply, indicating growing optimism.  Also, a key survey of individual investors--the American Association of Individual Investors--shows nearly twice as many bullish respondents as bearish ones.  This is almost a complete reversal from a couple of months ago.

So while I continue to encourage the purchase of selected individual stocks that meet strict quality and valuation criteria, I have a neutral position on the stock market overall.

Steve Lehman

S & P 500:  1264

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