The above chart represents 100 years of S&P trading history market p/e multiple. Only two times in history have the bulls made big profits by going long above a 22 market multiple. As you can see, both times the bulls gave all that back and then some.
The market will bottom below a 10 multiple, always has. I look for that to occur sometime in back half of 2011 or early 2012. Keep in mind we are in a 20 year period of stock multiple contraction that began in 2000. The market cycles between expansion and contraction. 1980-2000 was 20 year expansion, 2000 to 2015-20 is multiple contraction.
As you know I believe firmly in the time/counting method. Stocks historically move in the same multiples of time windows and in even up/down ranges. This chart goes back to the March lows of 2009 and counts to each peak/valley move. You can see we were 90-100 days into the first leg, 180 days or double the 90 into 2nd leg, and now look to complete the trend around the 2nd week of May, or 90-100 days into the 3rd.
We are looking for a FIB retrace of 61% over the next 90-100 days getting the S&P down to 850-900 range. We will cover our shorts at that time on evidence of stabilization. The market should move into a sideways pattern the next 6 months setting up a bear rally for 2011-2012 to take us below a market multiple of 10.
You're not factoring in the Obama trading desk/printing press. In order for him and his socialist policy to be re-elected, this market CAN'T go down.
ReplyDelete