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Amateur Investors Weekend Stock Market Analysis (3/22/14)

http://www.amateur-investor.net/Weekend_Market_Analysis_Mar_22_2014.htm

The common theme among the investment community is that the market has started another Secular Bull Market which will lead to a repeat of the 1980's and 1990's. Although nothing can ever be completed ruled out history suggests that it's not likely. An analysis of a few key parameters which can easily be developed into a Overbought/Oversold Index suggests the current market environment is similar to that of the late 1990's, late 1930's and late 1920's.

The chart below is a plot of the Overbought/Oversold Index that tracks Long Term Interest Rates, Shillers PE Ratio and how far the S&P Comp is above its 5 Year Low. Going back to the early 1880's there have only been "4" occasions when the index has reached or exceeded the 40 level using a 6 Month Moving Average (red line). The previous "3" events in 1999, 1937 and 1929 were eventually followed by significant corrections ranging from 50% to 87%. So far the market has avoided a substantial correction however you have to wonder how much longer this will last.