If You are long RUSSEL 2000 ETF (IWM) you are long at ....
- Thread starter hajimow
- Start date
I believe that IWM is overvalued and I am not talking about 10% or 20% overvalued. I believe it is overvalued 300% based on DOW at 17500 or S&P at 2050. I know what I say is super funny but I have to say that. I have seen many analysts believed that small caps valuations were ridiculous and they were not crazy people. I noticed they have become quiet after a while as they did not want to keep saying that did not pan out in their expected time frame. IWM is very stubborn and rigid and that is why it makes many traders to go long as it seems it is a free money. I can assure you that rigid and stubborn stocks do not bend (like a live branch) they snap (like a dry branch). I am sure that many shorts on IWM including I might lose money because even us under-estimate how low IWM could go and might go long after it drops substantially. Check out the IWM stocks. 80% of them have negative P/E. IWM is in the largest shorted ETF list in Interactive broker accounts. All things said, I don't recommend shorting IWM for the faint of hearts. You should know how to short a stock and how to manage your shorts.
Two reasons why i exited and they had nothing to do with the fundamentals (which, thinking about it, are quite positive imho, your analysis is totally off the mark):
1) i misread the chart, thought we were in uptrend mode by MY definition but it's actually in downtrend mode;
2) this greece referendum over the weekend, i have no idea what's gonna happen on sunday evening.
1) i misread the chart, thought we were in uptrend mode by MY definition but it's actually in downtrend mode;
2) this greece referendum over the weekend, i have no idea what's gonna happen on sunday evening.
IWM may be overvalued, and surely some of the stocks in it are. However, it is possible to make good money holding stuff that everyone says is "overvalued." Overvalued does not mean it will not go up some more. And eventually, yes, it will come down (everything does at some point). I'll sell it when it stops trending, not when it's overvalued.
There was a bear at my door last Halloween. Maybe it was you?
There was a bear at my door last Halloween. Maybe it was you?
Good point but I can assure you wont be able to sell when it stops trending. You wont see that trend after it is too late.
High valuation with that stock category is a given. However, large value is terribly depressed. Whether it is leading or lagging depends on where you think we are in the business cycle. We are facing rising rates that are expected to be delayed and an election year. The difficult thing to do is remain long and that is what makes it potentially rewarding.
Let me back pedal a weakened argument. I mean depressed technically. PEG is the best indicator for this category. However, textbook buy entries under 1.0 have been impossible to find. We would need a recession or some kind of dislocation like the oil industry.
Nonetheless, we still don't have 1.0 PEGs and the market still has not produced a late stage rally in oil and materials. "Maybe this time is different."
Nonetheless, we still don't have 1.0 PEGs and the market still has not produced a late stage rally in oil and materials. "Maybe this time is different."
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You are right about the technicals. I have not seen a PEG <1 for years on a quality stock. So that is definitely looking toppy.
Perhaps there are too many variables tossing oil around: the US discoveries, the Saudi pumpfest, the rise of electric vehicles, and the China fear. Or maybe it will still rally.
Perhaps there are too many variables tossing oil around: the US discoveries, the Saudi pumpfest, the rise of electric vehicles, and the China fear. Or maybe it will still rally.