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Saturday, May 16, 2009 6:26:33 PM
Amateur Investors Weekend Stock Market Analysis (5/16/09)
http://www.amateur-investor.net/Weekend_Market_Analysis_May_16_09.htm
During the past 110 years the US has gone through a series of Economic Cycles which has been reflected in the stock market. Once again if we compare the Historical PE Ratio to the Inflation Adjusted Chart of the S&P Composite a few things standout. First each Cyclical Bear Market has not bottomed until the PE Ratio has dropped below a value of 7 (green line). This occurred in 1982, 1932 and even further back in 1921. Currently the PE Ratio is around 15 so if history repeats itself then it would have to drop back to around 7 before a bottom would occur. Meanwhile if we compare the charts of the "3" previous Cyclical Bear Markets to the most recent one the overall pattern looks similar to that of 1968-1982 and 1906-1921. Both of these Cyclical Bear Markets were drawn out affairs in which the S&P Composite took the form of an elongated ABC type corrective pattern that lasted from 14 to 15 years.
Furthermore when you breakdown the 1906-1921 and 1966-1982 time periods what's amazing is that after completing their "B" Waves it took 9 years for both of them to complete their elongated "C" Waves. Now if we look at the current Cyclical Bear Market a similar ABC type corrective pattern appears to be developing as the "B" Wave completed in late 2007. If we see a similar pattern evolve for Wave "C" then it will elongate out and could take several more years to complete like occurred back in 1968-1982 and 1906-1921. Meanwhile also notice the S&P Composite is still well within its longer term upward channel and its entirely possible it may eventually drop back to the bottom of its channel before a Bear Market bottom occurs.
Meanwhile if we compare the 1968-1982 time period to the current pattern it appears we are basically in the same spot as we were in the mid 1970's in which the S&P Composite had a decent rally from 1975 through the early part of 1976 (points D to E) before going through an extended downtrend which finally bottomed in 1982 (points E to F) as the "C" Wave ended. Keep in mind these are Inflation Adjusted Charts so the non Adjusted Inflation Charts will look somewhat different when you compare the two.
In 2008 our ETF Strategies worked the best with which had a return of +33% versus the S&P 500 which was down -38.5% for the year.
Meanwhile our 401K Strategy finished up +17.3% for the year.
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to these Investment Products which include the following:
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's, SPY's and OIH's. Our ETF Strategy returned 33% in 2008.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account which was up +17.3% in 2008.
3. The "End of Month Strategy" finished up +36.3% in 2008. This Strategy focuses on the typical End of Month markup by the Institutional Money.
4. "Stocks to Buy List" which can be used with either our Short Term Strategy or Long Term Strategy. In 2007 our Long Term Strategy finished even for the year versus the S&P 500 which was down -38.5%.
http://www.amateur-investor.net/Weekend_Market_Analysis_May_16_09.htm
During the past 110 years the US has gone through a series of Economic Cycles which has been reflected in the stock market. Once again if we compare the Historical PE Ratio to the Inflation Adjusted Chart of the S&P Composite a few things standout. First each Cyclical Bear Market has not bottomed until the PE Ratio has dropped below a value of 7 (green line). This occurred in 1982, 1932 and even further back in 1921. Currently the PE Ratio is around 15 so if history repeats itself then it would have to drop back to around 7 before a bottom would occur. Meanwhile if we compare the charts of the "3" previous Cyclical Bear Markets to the most recent one the overall pattern looks similar to that of 1968-1982 and 1906-1921. Both of these Cyclical Bear Markets were drawn out affairs in which the S&P Composite took the form of an elongated ABC type corrective pattern that lasted from 14 to 15 years.
Furthermore when you breakdown the 1906-1921 and 1966-1982 time periods what's amazing is that after completing their "B" Waves it took 9 years for both of them to complete their elongated "C" Waves. Now if we look at the current Cyclical Bear Market a similar ABC type corrective pattern appears to be developing as the "B" Wave completed in late 2007. If we see a similar pattern evolve for Wave "C" then it will elongate out and could take several more years to complete like occurred back in 1968-1982 and 1906-1921. Meanwhile also notice the S&P Composite is still well within its longer term upward channel and its entirely possible it may eventually drop back to the bottom of its channel before a Bear Market bottom occurs.
Meanwhile if we compare the 1968-1982 time period to the current pattern it appears we are basically in the same spot as we were in the mid 1970's in which the S&P Composite had a decent rally from 1975 through the early part of 1976 (points D to E) before going through an extended downtrend which finally bottomed in 1982 (points E to F) as the "C" Wave ended. Keep in mind these are Inflation Adjusted Charts so the non Adjusted Inflation Charts will look somewhat different when you compare the two.
In 2008 our ETF Strategies worked the best with which had a return of +33% versus the S&P 500 which was down -38.5% for the year.
Meanwhile our 401K Strategy finished up +17.3% for the year.
Signup for a "Free 4 Week Trial Membership" or save up to 50% on a Premium Membership and you will have access to these Investment Products which include the following:
1. "ETF Daily Buy and Short Signals" which can be used to trade the DIA's, QQQQ's, SPY's and OIH's. Our ETF Strategy returned 33% in 2008.
2. "401K/Thrift Savings Plan (TSP) Timing Service" which can be used to help improve your return in your 401k/TSP Account which was up +17.3% in 2008.
3. The "End of Month Strategy" finished up +36.3% in 2008. This Strategy focuses on the typical End of Month markup by the Institutional Money.
4. "Stocks to Buy List" which can be used with either our Short Term Strategy or Long Term Strategy. In 2007 our Long Term Strategy finished even for the year versus the S&P 500 which was down -38.5%.
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