General US market P/E is 37? If I read that graph right, this is worse than I thought. I was referring to valuations in the context of the markets as a whole in a way of estimating the direction of the averages and the durability of this rally. To be sure with 8,000 or so stocks, at any time some will be vastly overvalued and some vastly undervalued. The "efficient market" always seemed pretty inefficient and faddish to me short term :>). If it wasn't that way, the stock market would be a lot less interesting and rewarding to the wise.
I'm still 60 to 40% that this is a bear market rally on overall market valuation basis and lack of any hints of recovery (book to bill of .73!!). When I think that there is a good chance of a dump, I just tighten stops and get trigger happy on the sell button. As LG says, always have a Plan A (your strategy/tactics) and a Plan B (what if you are wrong, exit strategy). I lurk and rarely post but have been getting really nervous lately. This is because I'm seeing generalized moves up on a lot of really weak, borderline companies that were justifiably beaten down =frothiness, generalized and indiscriminate buying.
I would be very surprised if this corrected to the norm, p/e of 15? in less than years. Look at the Japanese stock market bubble of the 80's. They are still dealing with it. Also, it doesn't have to be that price comes down, or the earnings e goes up, at least directly. One thing about a bubble hangover, it is good for correcting economic imbalances. Between mergers, acquisitions, bankruptcy, and delisting a lot of weaker companies will simply disappear. This will help the p/e by raising the denominator without earnings necessarily increasing much at all.
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