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

“The stock market has risen too much, stocks are overvalued, there is a risk of overheating.” These are the main statements that we have read over and over again in recent years and increasingly in recent months. But the bottom line is that the market has risen significantly. Was its nun also loose? Are we facing a strong correction or even a crash? Or is this talk of the market overheating just another episode of storytellers?

Today's central bank meeting may bring about something, but a complete change of direction is not to be expected. The warning voices whose arguments we have summarized above are probably the same ones who missed the Bitcoin rally and the outstanding performance of Nvidia shares. There may also be some frustration in these warnings about having missed something.

Is the market overheated or not?

As long as there are buyers, the market is not overheated. Who can 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 indicators point to overheating, that does not mean that the market is really overheated. Perhaps these indicators are too rough. A kitchen knife is not suitable for surgical interventions either.

We believe that the stock market in the US and Europe is anything but overheated. Both are hotheads, but in the best sense of the word. They want to reach the top, and they will. We believe that panicking is a mistake. Now is the time to have a cool head that recognizes opportunities, takes advantage and doesn't wait for others to realize their profits.

But where are the opportunities?

Let's take an excellent example of a stock that has performed ideally in recent years: Palantir (NYSE:). After a meteoric rise, Palantir fell very sharply. That is the rule, not the exception. But this necessary and healthy correction is now over. Palantir has recovered extremely well in recent months.

Palantir's share price had barely reached an important milestone by being included in the index when it recorded a new high since 2022. But that was not all: financially strong customer BP (LON:) 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 had sold their own shares – a potential warning sign? Often it is insiders who know best how a company is doing. There were even rumors that Peter Thiel, founder of Palantir, wanted to sell his shares. What does this mean for shareholders, and is it better to sell Palantir shares now?

Those who trade in the short term can certainly consider it, because there will be a correction. Those who trade in the long term will soon have a very good buying opportunity. And those who are already invested should stay that way and buy more at the next opportunity.

And that opportunity is coming soon. Palantir has reached a strong resistance cluster in the range between $37.04 and $41.82. We expect a recovery phase that can push the price significantly lower. It is less likely that Palantir will succeed in breaking through this resistance cluster directly to the upside.

The good news: $20.20 is most likely the long-term floor that this stock will not 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 its next deal: Palantir Technologies has signed a multi-year, multi-million dollar contract with Nebraska Medicine, an academic health system with revenues of $2.5 billion.

Nebraska Medicine, a leading healthcare innovator, will use Palantir's artificial intelligence platform (AIP) to improve healthcare delivery, although financial details were not disclosed in the press release.

Nebraska Medicine invests heavily in driving healthcare innovation. Within a year of collaboration, over ten AIP applications were implemented that optimize patient throughput, improve reimbursement, and more efficiently monitor patient care.

“Nebraska Medicine is one of the most innovative healthcare organizations in the United States. “While many institutions have big visions, Nebraska Medicine quickly turns them into practical solutions,” said Drew Goldstein, co-head of healthcare at Palantir. “Their rapid engagement in this partnership underscores our shared focus on achieving significant results to improve patient care.”

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