Stock Indices

Stock Market is Due for a 15-20% Correction – Here's Why

Corporate America has been flying high since the recession, barely looking back since March 2009. The 70% rally in the S&P 500 in just under 2 years has been astounding to say the least - but are we really in 70% better shape as a nation since March 2009? No way! The dollar has continued to decrease in value, investments that feed off fear like gold and silver have soared....housing prices are still as low as in 2009, when they "crashed." The signs of a major market correction...[are] right in front of us... no one seems to notice [but I do]. I believe we could soon experience a market correction of from 15% to 20%. Let me explain why. Words: 913

Read More »

Will the S&P 500 Rally or Fall Off a Cliff?

In the face of lackluster economic growth and no hopes for new stimulus anytime in the near future, the global tightening cycle may force the market back into a deflation scare. Either way, caution remains warranted in such an environment. [Let me explain further.] Words: 568

Read More »

P/E Ratio of S&P 500 at 9 Month Low! Is It Time to Buy?

[One look at the P/E ratio of the S&P 500 these days clearly suggests that] the market is overly worried about the future. Put it this way: [were one to] apply the S&P 500 average earnings multiple of 16.94 from 2004 through 2007 to Wall Street’s earnings forecast for 2012 would give us an S&P 500 of 1,891! Words: 400

Read More »

Surprise! Limited Downside Risk Exists In S&P 500

A market is not built solely on fundamental realities, but how broadly those realities are expected by investors. So it goes without saying that it can be very insightful to compare market expectations to reality. When expectations are high there is the likelihood for disappointment. When expectations are low there is a potential for upside surprise. There is actually an index that measures the relationship between economic reality and crowd expectations. It is the Citigroup Economic Surprise Index (CESI). [Let's take a look at what it is saying these days.] Words: 773

Read More »

Here's How to Make the Most of Upcoming Buying Opportunity

This quarter’s mid-period has a negative focus [and we are] now seeing the result - a growing belief that the stock market run is over. [If that is, indeed, the case then it is most important to know exactly how to take advantage of the buying opportunities that are about to come about. Here's what you need to know to do just that.] Words: 925

Read More »

Today's Market Breadth is Bad Breath for Tomorrow's Market – Here's Why

"Where breadth goes, the market usually follows,” goes an old market saying and as Richard Russell said recently, "In a deteriorating market breadth situation where the ‘soldiers’ are deserting even while the ‘generals’ continue to march forward would be a prelude to disaster. In the stock market, it may be the same." [Let's review the current situation and see where we're at.] Words: 478

Read More »

Could Dow 20,000 be Just Around the Corner?

Most first quarter 2011 earnings reports are in and...over three-quarters exceeded expectations... [with] results showing a desirable combination of growing revenues, profitability and cash flow ... [As such,] today's stock market valuations are conservative compared to typical bull markets accompanied by investor enthusiasm. In the past, using 2011's estimated earnings, the average P/E ratio could easily be 15 and...that would put the Dow Jones Industrial Average (DJIA) at 15,000 today – about 20% above today's level. [Were we to] add in high optimism like the kind we've seen in other investments recently, a 20 P/E ratio would be possible - and the DJIA would be 20,000 – 60% higher [than it is today! Let's take a look at the possibility.] Words: 540

Read More »

Note: Current Cyclically Adjusted Price Earnings Ratio Says S&P 500 is Over-valued

The Cyclically Adjusted Price Earnings Ratio, abbreviated as CAPE, or the more precise P/E10, closely tracks the real (inflation-adjusted) price of the S&P Composite. After dropping to 13.3 in March 2009, the P/E10 has rebounded to 23.0. The historical average is 16.39 raising concerns about the current price level of the S&P Composite. Let me explain. Words: 1298

Read More »

Counterpoint: Equities Are NOT Overvalued

There are different ways to interpret corporate profits and different ways to measure them [and in this article I substantiate] my belief that profits are quite strong and that the market is almost certainly not overestimating their value [unlike other analysts who, in articles here and here, and using different criteria, have come to different conclusions. Please read all the various points of view and come to your own conclusions.] Words: 646

Read More »