Some Warning SignsIn my past post, I mentioned my concerns over the fact that the market sentiment indicator has been stuck in the Greed and Excessive Greed range for the past few weeks. This is usually a signal that the market is getting overheated. Sooner or later the last person desperate to get in will have spent all their money and the number of buyers declines and the market retreats due to a lack of buyers.
The other worriesome indicator is the so-called Buffet indicator. Buffet has often said that this indicator is the one that he relies on since it is the most accurate.
So what is it ?
His indicator is to take the Wilshire 5000 which is the broadest market index and compare the valuation of those stocks to US GNP. In simple terms it measure the value of all the stocks against the size of the US economy. For Buffet, a reading of 100% is OK and a reading of 70% or lower suggests that there are bargains out there.
What is the current value of this comparison?
Ready???
190%!!!!
Something to think about when making investment decisions.