Tomorrow morning I may scan those 31 capitulation days and see how many retested lows after a 5% bounce in the first week.

]]>Anomaly notwithstanding, I’m expecting at least a retest of Friday’s low. But first I’d like to see the short term oversold condition worked off. And the intermediate oversold/overbought indicators are nowhere near oversold yet.

]]>Your theory of anomaly re last week was somewhat strengthened today, yet still not completely resolved.

I don’t put a great deal of weight on valuation, but in my model, I take an exponentially smoothed average of quarterly earnings and then project my earnings estimate forward based on the trend in exponentially smoothed monthly Leading Economic Indicators to come up with my own forward estimate of earnings. I need to document this approach some day. I have heard estimates of 87ish for earnings and if that were to be the case, you have an even stronger case for equities. Since I was trying to ‘take a look from both sides now’, I was trying to be conservative.

In my Dynamic Thrust table above, I mentioned that the 20 day Thrust signals were 7-0 for 3, 6 and 12 months. But you can see from the table that only two of the original signals listed came from 20 day thrust. The 5 additional signals on the 20 day thrust signal came days after many of the 5 and 10 day signals were generated. An oversight on my part for this post. The 20 day signals take a few more days to develop but are very powerful when observed. There is a previous post on those sometime back in March.

]]>Do you ever look at the 12 month forward earnings estimate for the S&P ( from First Call), which is currently $86.90. The market valuation model I use is somewhat based on this number.

]]>When I came into this stuff, I was trained to think 15 as well, but we were coming out of the high interest rate decades of the 70’s and 80’s. With low interest rates the last decade, the trailing 40 and 50 year PEs have risen as stocks have traded in the 20’s for a long period.

The median would likely be a bit lower, since the 2008 4th quarter numbers skewed the averages.

]]>I threw this together Sunday and sent it to Babak Sunday afternoon around 5pm E and he did yeoman’s work to get it formatted and out to you this morning. Much appreciated, Mr. Babak.

Wayne

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