Can The Market Go Higher From Here?

Q. Is the stock market fair or over-valued at this time?

A. It depends on which camp you are in.  We will present some of the bears and bulls' views below:

Bear's view: The Market Will Go Down From Here

• The market index was only lifted by a few high flyers, while most other stocks are lagging in performance
• If you use equal weight to measure S&P 500's performance in July, it only advanced 0.88% vs. 2.3% using hte actual market-cap weights
  
• The number of new 52-week highs relative to 52-week lows going down
• The "advance-decline line" is going down
• The percentage of stocks trading below their 50-day moving averages are not showing well

In short, technical indicators as well as most stocks' performances are not giving investors the optimistic view on the next direction of the market movement.

Bull's view: The Market Could Still Go Higher

• No sign of U.S. recession: the economy grew 2.3% in Q2 2015
• The Housing market continues to be strong
  
• The bad divergences not always leading to declines, based on historical data
• The market is still within the support zone - in the 2000-2010 area, in order to signal the end of the up trend, the market has to break down the support zone
• Investors have been pulling money out of the market, never a sign the market has reached euphoria - which usually happens when investor are pulling money in to chase the highs

In short, the slowly recovering economy, mild inflation, and the Fed will raise rates in stable paces are all good news for the market.

The Bottom Line
No one has the crystal ball, it's best to build a diversified portfolio and aim for the long term!