new high!

So the Dow pierced it's 2000 all time high. Okay. Gotta say I'm not impressed. First, it took six years for a new high, and secondly, the fundamentals don't justify it.

The P/E is historically well above average, bonds are inverted, housing is slowing (though slightly less than expected this month), etc. The best news for the economy is that oil prices are coming down, and are likely to continue downwards. The porblem is that this market has risen on the back of oil, gold, copper and silver. With deflation in those prices, Wal-Mart rises on lower goods and transport prices, but with diposable income being capped by the slowing housing market (and resulting equity loan limitation), consumers won't be able to fully participate in the lower prices, and a sink-hole may be created in consumer oriented stocks.

I will ride the market upwards so long as it heads up, but I don't buy it. I'm in SUMT and FISV on the long side, but I'm hedging with long puts on OIH, ESRX, BNI. The market is rotating, and I'm not confident in the direction to which it is rotating. The market is creating cavitation in this upwards move.

Play it, but hedge!

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