Shortly thereafter, the market declined significantly into June, recovered a bit,then took off on the latest plunge. So, where are we at now? Consider the tablesbelow. Here you can see that the Market and Sector valuations have pretty muchreversed themselves.
Stocks Undervalued by 20%
Stocks Overvalued by 20%
Aerospace8.67% overvalued7.62% undervaluedAuto-Tires-Trucks9.34% overvalued13.13% undervaluedBasic Materials10.35% overvalued9.84% undervaluedBusiness Services9.75% overvalued8.03% undervaluedComputer and Technology9.95% overvalued11.35% undervaluedConstruction5.34% overvalued8.82% undervaluedConsumer Discretionary6.96% overvalued11.13% undervaluedConsumer Staples10.28% overvalued4.93% undervaluedFinance7.64% overvalued9.15% undervaluedIndustrial Products10.11% overvalued12.04% undervaluedMedical5.14% overvalued12.85% undervaluedMulti-Sector Conglomerates16.31% overvalued8.11% undervaluedOils-Energy20.39% overvalued6.87% undervaluedRetail-Wholesale8.22% overvalued6.69% undervaluedTransportation13.49% overvalued4.12% undervaluedUtilities12.61% overvalued0.32% overvaluedsp500
Our watches and warnings let us know that the model thinks things areoverheated, but they cannot tell us when a correction will occur, nor can they tell usits duration and depth. At today's levels, we are now flirting with a drop of 10% fromthe May 2nd highs. In this case, we got a warning back in May that has indeedpresaged a "correction" some two months later.In the past, we have found that in some cases the market heads for a longdive, in others we see just a momentary drop before the market resumes an upwardclimb. We simply do not possess the long-term historical data necessary to completea better study of the metric.