I was talking to a friend online and gave him a quick summary of...

I was talking to a friend online and gave him a quick summary of what I thought of the current market.
This could be a correct or incorrect analysis based on what plays out but it sounds logical and makes sense to me.


The stock markets may now be "fair valued" after the recent correction, according to businesses forward P/E's and under the current economic conditions. (with a bit of overshooting in either direction).

If economic data continues to come out poorly and/or 'demand'(growth) for products continues to decline then we will likely see further declines in the stock market.
The opposite of this would likely be true if 'demand' (growth) starts to rise again.

All economic indicators/data continues to suggest a further decline though.
These business/market/economic cycles feed upon themselves e.g.
- More demand creates more demand
- Less demand creates less demand, less jobs, less spending, less products, less profits, lower share prices, lower market indexes.

QE/QT and Interest rates have a large impact on the markets also.
We now have QT and high interest rates relative to where they have been for the previous 10 years.

If this cycle decline continues to play out, then we could start seeing defaults by the large "Zombie Companies" that have been well supported by QE and low interest rates.
If enough of these large companies start failing/defaulting then that could trigger a massive sell down (aka Black Swan).

In summary,
- The easy money shorting has probably already been made.
- If poor economic data continues to come in then expect further declines.

Better to be patient and wait for good oversold/overbought setups.

Remember the market can stay irrational longer than you can stay solvent...