It's true that stocks aren't cheap and this market is long in the tooth. And sure, investors are rushing back into stocks. A correction wouldn't surprise anybody. But we aren't in bubble territory.
My take on this is technical, because many of the arguments the bears are making ("Overbought!") are technical in nature. Here are some charts to support my case ...
John Murphy at Stockcharts dispells the idea of a tech bubble ...
He agrees that the Nasdsq Composite Index (which is driven mainly by technology stocks) has risen to the highest level in 13 years and its 14-month RSI (red line) has reached the most overbought territory since 2000.
However, he says that the rise of the Nasdaq relative to the S&P 500 is not in bubble territory.
Murphy says: "From the start of 1999 to the spring of 2000, the technology-denominated Nasdaq outperformed the rest of the market by 700%. That's what a bubble looks like. Compare that to the more modest rise in the blue line since 2009. The blue line shows the Nasdaq/SPX ratio at a new 13-year high, but nowhere near the bubble-like condition that existed at the start of 2000."
You can read the rest of Murphy's excellent analysis here: http://stockcharts.com/members/analysis/20131121-1.html
And Barry Rithholtz calls on Robert Schiller's cyclically adjusted P/E ratio to show that the S&P 500 is not valued at the levels associated with market tops ... yet.
Meanwhile, Merrill Lynch is projecting that the S&P 500 will go to 2,300 now that it has clearly broken out.
Source. And Barry Ritholtz has more analysis of this chart HERE.
Finally, Miller Tabak chief economist Andrew Wilkinson compares the rally in the S&P 500 to the one seen right before the crash of 1929 ...
"By normalizing the move to the respective start dates we can create a rather different and more favorable picture for the current run. The stock market ran up 80% prior to the crash of 1929 before eroding two years’ worth of gains.Josh Brown seems to have the best take on this ...
"Looking at the relative position for today’s rally leaves the S&P 500 index higher by only 27% after a comparable period of its recent rally. The comparison to the late ‘20’s experience suddenly loses its magic in this light and helps roll back accusations that the market is running on vapors instilled by the Fed and that valuations are frothy."
Have a good weekend.