Most analysts think stocks are still in fair value. But, I do believe they are now about 30% overpriced based on the true mean P.E which is about 16. As such, I say that we have already witnessing the early signs of bubble building up in stocks.
I think if they go up at least another 30%, you would have a genuine bubble, at which point stocks would be at least twice their fair value. We all know that. In 2000, stocks were about triple of the fair value and then it crashed to pieces. Nothing goes up in straight line.
Bubbles don’t usually bust until everyone from all walks of life are involved in the stock market. That hasn’t happened yet, so that tells me there is probably quite a lot left in this rally. Be careful with what I say here: I am talking for the next 2 years.
For short term, major correction could start at any time now or delayed till May.
On longer term basis - Based on Time and Price level, this rally can go up a lot higher in the next 2 years based on the 17 years Cycle (2000 top to 2017 bottom). I expect SP and DOW to double up from the current level to 3600 and 30000 at least. But as always suggested, don’t get too complacent, fasten your seatbelts at all times due to big volatility and some intermittent short panic crash along the way before reaching the peak in 2016.
What fuels the market to continue rally? Loose monetary policy!
Comment: Do they look alike –brother and sister? Of course not but their body language are telling you the same message – low interest rate and loose monetary policy – that may propel the stocks higher and higher for the next 2 years before they start to fall into the financial abyss.
Give yourself the investing advantage. Know where indices/stocks are headed over the coming weeks, months and years. Prepare for turbulent times. Our indicators are doing an amazing job identifying trends-cycle top and cycle bottom.