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" It looks as if this breakout will form a new trading range at a higher level for the index, but whenever we get this extended, it's hard to continue higher in the very near term. The last time the market was this extended was last September, and you can see in the chart below that it marked a short-term peak."
Bespoke uses a 2 standard deviation/50 dma stat to call the market, or sectors, overbought or oversold, 2 sd's being a common statistical measure of outliers in many walks of "life". M* uses its own scheme, which depends on its assumptions about measuring valuation (not sure if those are disclosed anywhere).
So those are two different measures, and actually two different kinds of measures.
Reply to @AndyJ: Thanks Andy. Long term stock prices are driven fundamentally by earnings. I know WSR and Professor Shiller believe the P/Es are inflated. I'm not so sure. Again, hoping for confirmation in earnings reports ahead. Lately it seems like so many advisers and fund managers are predicting a big pull-back. It's almost as if a retreat would somehow justify missing the recent rise in equities...that the run-up was "artificially" inflated. I am allocating on the basis that it is indeed a bull market and until proven otherwise (eg., SPY below 10 mo SMA), will remain so. Fingers-crossed.
Related note: we have relatives, retired living in Phoenix, have been wanting sell their home for several years and down size, but the very depressed market there prevented it. Until recently, we just heard they were putting their house on market as prices are escalating again...finally.
I have given some thought, over the night, to this post with the two different ways value has been presented above from both a technical perspective and a fundamental driven based perspective.
In reviewing SPY through Morningstar’s Instant Xray Analysis I noticed that the Projected ESP Growth – 5yr% has been revised and moved downward from about 10.86% (first part of 2013) to 9.86% (just recently). This computes to about a nine percent reduction. This is saying to me, that there is now a slow down happening with growth and perhaps investors have become over enthused in bidding stock prices upward based upon high earnings projections from the first part of 2013 ... that I felt were no doubt overly optimistic. Reality seems to have now set in as these growth projections have and are now being revised downward.
From a formula I learned way back in college, in the late 60’s and recently touted of the Crossing Wall Street site, I compute fair value for the S&P 500 Index at 1485 based upon the 9.86% Projected ESP Growth. Note, the price valuation number can change quickly as the Projected ESP Growth rate and estimated earnings are revised.
Now the key question … from my thoughts … Are stocks currently overprice as these downward earnings revisions take place? We are soon to find out. Just watch the ticker tape. And, understand that the beat rate being reported is based upon revised estimates that can happen just days or even a day before a company reports.
Reply to @Charles: I wish your relatives luck selling their house. I think houses are in the process of a multi-speed bottom. Additionally, I think (as I noted in another thread about following a relative through the "first time buying" process) they've made the process a lot more difficult than it was a few years ago, but some areas especially seem to be towards the end of a bottoming process and/or recovering I think started late last year. Relators I've talked to have also been fielding a lot of calls from investors.
As for the market, I continue to go with the Buffett theme of owning what you would be comfortable owning if the market was closed for years. I'm not contributing anything more this year, but - aside from some selling of remaining small positions I'd like to close I'm not selling anything either. Essentially trying a year where I essentially close the books early in the year. Will be difficult for me to do, but I will have a far easier tax prep process to look forward to next year...
Technicians are able to produce pretty much whatever result they want by choosing the kinds of numbers they include in the research undertaken. While I would not say that we are in an over-sold point, I would also not buy into the extreme over-bought line, either. I do, however, believe that we are long overdue for a real correction. That would make me feel much better about putting new money to work.
Here's updated M* Fair Value chart after yesterday's trimming:
Need good earnings week, if this unappreciated bull is ever going to get some respect.
BTW. A while back I posted that local housing market was picking-up. A neighbor just sold her home for full asking price after being on market only two weeks, exceeding expectations. Been a while since hearing such reports, like early 2007. Prices are still not at 2007 levels, which is probably a good thing...unless you are upside down and needing to move. Inventories here remain low.
Reply to @Charles: 4 houses in our vicinity were snached up within days of going to the market. all at or around market prices and some with multiple offers. my only observation is that these are fairly cheap for the area, so they make decent starter homes for the first time buyers. i don't have observations for the moving up types...
Comments
So those are two different measures, and actually two different kinds of measures.
Related note: we have relatives, retired living in Phoenix, have been wanting sell their home for several years and down size, but the very depressed market there prevented it. Until recently, we just heard they were putting their house on market as prices are escalating again...finally
I have given some thought, over the night, to this post with the two different ways value has been presented above from both a technical perspective and a fundamental driven based perspective.
In reviewing SPY through Morningstar’s Instant Xray Analysis I noticed that the Projected ESP Growth – 5yr% has been revised and moved downward from about 10.86% (first part of 2013) to 9.86% (just recently). This computes to about a nine percent reduction. This is saying to me, that there is now a slow down happening with growth and perhaps investors have become over enthused in bidding stock prices upward based upon high earnings projections from the first part of 2013 ... that I felt were no doubt overly optimistic. Reality seems to have now set in as these growth projections have and are now being revised downward.
From a formula I learned way back in college, in the late 60’s and recently touted of the Crossing Wall Street site, I compute fair value for the S&P 500 Index at 1485 based upon the 9.86% Projected ESP Growth. Note, the price valuation number can change quickly as the Projected ESP Growth rate and estimated earnings are revised.
Now the key question … from my thoughts … Are stocks currently overprice as these downward earnings revisions take place? We are soon to find out. Just watch the ticker tape. And, understand that the beat rate being reported is based upon revised estimates that can happen just days or even a day before a company reports.
Indeed something to think on? Yes.
Skeeter
As for the market, I continue to go with the Buffett theme of owning what you would be comfortable owning if the market was closed for years. I'm not contributing anything more this year, but - aside from some selling of remaining small positions I'd like to close I'm not selling anything either. Essentially trying a year where I essentially close the books early in the year. Will be difficult for me to do, but I will have a far easier tax prep process to look forward to next year...
http://fundamentalis.com/?p=1548
Also, there is a discussion here as well.
http://oldprof.typepad.com/a_dash_of_insight/2013/04/weighing-the-week-ahead-a-critical-eye-on-earnings.html
Hi Investor,
Thanks for sharing these sites. I was aware of a Dash of Insite but not the Fundamentalis site.
Thanks again,
Skeeter
Here's updated M* Fair Value chart after yesterday's trimming:
Need good earnings week, if this unappreciated bull is ever going to get some respect.
BTW. A while back I posted that local housing market was picking-up. A neighbor just sold her home for full asking price after being on market only two weeks, exceeding expectations. Been a while since hearing such reports, like early 2007. Prices are still not at 2007 levels, which is probably a good thing...unless you are upside down and needing to move. Inventories here remain low.