I do think that stock prices are oversold and likely to rebound, partly because of the gloom over the "fiscal cliff" issue. I noticed yesterday, however, that fourteen prominent Wall Street strategists are forecasting a 14% rise in stock prices by the end of next year. That doesn't seem like gloom, does it? Perhaps it simply reflects the enormous career pressure on strategists to be optimistic (at least publicly) each year.
On the other hand, the put/call ratio has been a reliable indicator of sentiment, and it now is bullish for stocks. The ratio of put options on the S & P 500 relative to calls has risen sharply during the recent market correction, and it is now approaching the level of early June that preceded a sharp market rally. Though today's continued market weakness concerns me, I reiterate my recommendation to be positioned for higher stock prices.
Steve Lehman
LehmanInvest.blogspot.com/
S & P 500: 1375
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