My War Room partner, Karim, watches the fundamentals like a hawk, and there’s one number he keeps pointing to that should make you sit up.
It’s called the Shiller CAPE ratio. It’s one of the broadest measures of how expensive stocks are. And it just hit 41.
The long-term median is about 16. The only time in history it’s been higher was during the dot-com bubble peak in 2000.
Translation: this market is priced for perfection, and then some.
Two Approaches… Same Results
Karim and I approach the market from different angles.
He digs into the fundamentals and the valuations. He’s also like a shark with blood in the water when it comes to sniffing out insider buying. He’ll go into much more detail about that in this special event next week…
But I learned my trade on the floor of the CBOE, where I cut my teeth on fast, defined-risk option plays, getting in and out before the market knew what hit it.
But we land in the same place with a market like this one.
And here’s where most people get it wrong.
They see that Shiller CAPE number and think it’s time to short.
Bad idea.
The market can stay irrational longer than you can stay solvent, and betting against a market this stretched has been a great way to lose your shirt while it grinds higher for months.
So if you can’t safely short it, and buying and holding up here makes you nervous, what’s left?
You do what I was trained to do on the floor: You get in fast, take a quick defined-risk option trade, and ring the register before the market has a chance to turn on you.
Let me show you exactly what I mean, because I just did it twice on the same stock inside 24 hours.
A Flippin’ Great Strategy
The stock is Procter & Gamble (PG).
Boring, steady, the kind of name nobody panics over.
Yesterday afternoon, over in our Post Market Profits service, I flipped it for a quick overnight winner.
Then this morning, I liked the chart setup right back into the same level, so I sent War Room members into the PG calls.
Within six minutes, we were up 20%, and I sent the alert to ring the register.
And at no point were we exposed to some big, scary headline that could gap the thing against us overnight.
We were in, the money was booked, and we were on to the next one.
That’s the whole game in a market like this.
You don’t have to predict where the S&P lands by Christmas or short a freight train to make money.
You just have to be in the right setup for a few hours and disciplined enough to take the money when it’s sitting there.
Rinse and repeat.
When the market is this stretched, the quick option trade isn’t the risky play. It’s the safe one.
YOUR ACTION PLAN
Stop trying to guess the top of this market, and stop trying to short it. Both are good ways to get hurt right now.
The smarter move in a stretched market is to take fast, defined-risk trades like the back-to-back PG winners we just booked, where your downside is capped, and you’re out before any headline can touch you.
That’s exactly what I do in Post-Market Profits. I set up late-day flips just before the market close for a move the next morning.
And so far this year, we’re hitting them at a 90% win-rate… and we’re currently siting on a 7-for-7 win streak.
Isn’t that flippin’ great?