We have been calling for the market to pull back since it reached 4500 points.
Since then it has reached 5000 points and it seems at this level we are no longer alone as others look for a pull back.
The major banks especially CBA and Westpac are fully priced on our valuations along with Woolworths.
We are now starting to hear many commentators express their view that the market is overvalued.
However it has continued to hold at the current levels with a sideways move over the past week.
We need to keep in mind that the value of a company and therefore the value of the share market is based on its future forecast earnings.
At present the market is over pricing the future due to fear or greed and it certainly indicates caution. It is better to miss out on a little more upside than make large losses.
Next week in the US there are $85 Billion in spending cuts to come through.
Back home in Australia the government is clearly indicating spending cuts. These cuts will have a direct affect on the role that fiscal policy plays in the economy.
I continue to be cautious on the market and will continue to hold some cash for now.