Stocks too expensive, market overheated, crash. Myth or real danger?

‘The stock market has risen too sharply, stocks are overvalued, there is a risk of overheating’. These are the main statements that we have read again and again in recent years, and increasingly in recent months. However, the market has risen significantly overall. So what is going on now? Are we facing a major correction, or even a crash? Or is the talk of the market overheating just another tale from the storytellers?
 
Today's central bank meeting may cause some volatility, but a complete change of direction is not expected. Probably the admonishers, whose arguments we have summarised above, are the same ones who slept through the Bitcoin rally and also the outstanding performance of Nvidia (NASDAQ:NVDA) shares. There may also be some frustration in these admonitions about having missed out.
 
Is the market overheated or not?
 
As long as there are buyers, the market is not overheated. Who can still afford an apartment or a house in the big cities of Europe, be it Paris, London, Berlin, Munich, Milan, Rome, Barcelona, Madrid or Amsterdam? Prices are still rising because there are still buyers. The same applies to the stock market. Even if some key figures point to overheating, that does not necessarily mean that the market is actually overheated. Perhaps these key figures are too rough. A kitchen knife is not suitable for surgical procedures either.
 
We believe that both the US and European stock markets are anything but overheated. Both are hotheads, but in the best sense of the word. They are aiming high, and that is what they will achieve. We believe it would be a mistake to be guided by panic now. What is needed right now is a cool head that recognises opportunities, seizes them and doesn't wait for others to realise their profits.
 
But where are the opportunities?
 
Let's take an excellent example of a stock that has performed almost perfectly in recent years: Palantir. Palantir fell very sharply after a meteoric rise. That is the rule, not the exception. But this necessary and healthy correction is now over. Palantir has performed extremely well in recent months.
 
No sooner had Palantir reached an important milestone by being included in the S&P 500 than it reached a new high for 2022. But that wasn't all: its financially strong customer BP (LON:BP) extended its contract to use Palantir's AI platform for another five years.
 
However, there were unexpected reports that several of the company's executives have sold their own shares – a potential warning signal? Insiders often know best about the state of a company. There were even rumours that Palantir founder Peter Thiel wanted to sell his shares. What does this mean for shareholders, and should they consider selling Palantir shares now?
 
If you trade in the short term, you may well consider it, because a correction will happen. Those who trade in the long term will soon have a very good buying opportunity. And those who are already invested should stay invested and buy more at the next opportunity.
 
And that opportunity will come soon. Palantir has reached a strong resistance cluster in the range between $37.04 and $41.82. We expect a recovery phase that could push the price down significantly. It is less likely that Palantir will be able to break through this resistance cluster directly upwards.
 

 
The good news: $20.20 most likely marks the long-term bottom that this stock will no longer break through. That is our assessment based on our technical analysis method and the facts.
 
Why?
 
In addition to Palantir's inclusion in the S&P 500 index and the contract extension by BP, Palantir can already announce the next deal: Palantir Technologies (NYSE:PLTR) has signed a multi-year, multi-million dollar contract with Nebraska Medicine, an academic health system with $2.5 billion in revenue.
 
Nebraska Medicine, a leading healthcare innovator, will use Palantir's artificial intelligence platform (AIP) to improve medical care. However, more precise financial details were not yet announced in the press release.
 
Nebraska Medicine is investing heavily in promoting innovation in healthcare. Within a year of the collaboration, more than ten AIP applications had been implemented to optimise patient throughput, improve reimbursement and monitor patient care more efficiently.
 
‘Nebraska Medicine is one of the most innovative healthcare organisations in the US. While many institutions have grand visions, Nebraska Medicine quickly translates them into practical solutions,’ said Drew Goldstein, Co-Head of Healthcare at Palantir. ’Their rapid engagement in this partnership emphasises our shared focus on achieving significant results to improve patient care.’
 
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