RE:RE:Rig counts continue to drop, Shale growth stallsMatt...great summary.
For sure things don't seem to be adding up. Conflcting signals.
Over the decades when things like this are going on, I have learned to get in an airplane and take a look from 20,000 feet since looking at ground level isn't very useful and more importantly not profitable.
So let's get in an airplane and take a look....
1....the market sentiment is in Excessive Greed and has been for a couple of weeks and today despite that it went up another per cent. When the market is that frothy we are near a top and it is time to take some profits
2....the market valuations right now are overpriced based on two hundred years of relationships between interest rates and market P/E ratios.
3....If you plot the channel for the DJIA over the last hundred years you will see that every time the index gets at or above the upper bound of the channel we see a big decline in the index. Right now we are above the upper limit of the channel. The plot today is basically the same as 2008 and we all know what happened back then. Right now, the upper bound of the channel is about 20% below where the market is.
4...consumer debt is skyrocketing and close to being maxed out and consumers are 70% OF GDP. Increased consumer debt has been masking the underlying rot in the economy along with excessive government debt
5...oil/energy prices are usually a leading indicator of what is to come. Read the tea leaves. Don't just look at oil but also look at natural gas prices.
I made my money and made money for my clients when I was working on The Street by practicing a few things..
A....when everyone else is excited - GET OUT
B...BE PATIENT - sometimes you might be a bit early but better early than late
C...when things don't make sense BE SCARED