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Friday Finale – Final Chance to Go Away in May

Posted on the 31 May 2013 by Phil's Stock World @philstockworld

Thank you all for playing – have a nice Summer, be sure to come back for our Santa Claus Classic run in November.  As you can see from the chart on the right, even CNBC is noticing the disconnect between actual earnings and the performance of the market.  Earnings are the same as they were in early 2012 but the Dow is up 20% since then (from 13,000ish).  So, do we think earnings will pop 20% or the Dow will drop 20%?

These things used to matter.  As you can see, there's usually a pretty good correlation between earnings and the price of stocks.  I know, what a quaint, old-fashioned way of looking at things, right?  Well, you know what they say about old dogs and new tricks so you'll have to humor me and my paranoia when the market gets this far ahead of what we used to call a rational valuation.  

Of course, this time IS different as we have a runaway Central Bank that's throwing $85,000,000,000 into the economy every 30 days in the hopes of it stimulating the economy.  As I often say to members, when you have a patient lying in a hospital that needs $85Bn a month to survive – don't be fooled into thinking they're fine just because they're not getting worse!  Europe is getting worse as they're not getting $85Bn a month from their Central Bank and EuroZone unemployment hit 12.2% in April with 26.8% of the people in Spain out of work.  That's SPAIN, the 13th largest economy in the World!   

Friday Finale – Final Chance to Go Away in May

Money printing is forcing us to ignore the MASSIVE underlying problems that are still plaguing the Global Economy because we simply don't have room under our mattresses for $85Bn a month (and another $75Bn from Japan) so the money is forced into riskier and riskier assets and creating bigger and bigger bubbles as it moves up the chain.  13,000 + 20% is 15,600 and that's where we are now and 20% is right around where these bubbles tend to pop – or at least let some air out.  

Friday Finale – Final Chance to Go Away in May
That's why we raised our Must Hold levels on the Big Chart as we are not bullish until 3 of our 5 Must Hold lines are held and I've been focusing on Russell 1,000 for the past two weeks and it's…


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