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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (56665)1/16/2016 12:45:01 AM
From: Paul Senior  Read Replies (4) of 72606
I am using the SMA(200) weekly as my Buy point target. Note in 2008/2009 S&P sell off it was well below the SMA(200) weekly by almost 45%. That will put the $SPX around 1770 or about 110 S&P points which is about 990 DOW points lower from the current closing levels..

That seems to be a winning strategy so far. Not buying now based on waiting for your SMA target price is a tactic that beats my results so far of making many small buys as the market falls.


• Forward P/E: Probably the most common measurement, it divides the current S&P 500 price by 12-month forward expected operating earnings. It is presently slightly above its ~20-year median of 15.9.• T

I don't know where buying will come in. My guess, maybe at S&P 15x forward earnings (assuming those earnings actually occur). That'd make the S&P at 118.5x15= 1778. That's comparable to the number you're using (1770) as a buy point target. 1880-1770=110. So maybe another 6% drop in S&P and other stocks.

On the one hand, that 15 p/e wouldn't historically mean that stocks are cheap, only somewhat below the median average, i.e. "reasonable", as you've said. Otoh, I believe with interest rates so low, we should expect stocks to be valued at a higher p/e than otherwise. I mean bonds offer safety, but not much yield, so as an asset class for money-making, stocks should pull us in. Also, the S&P is dominated by AAPL, GOOG, MSFT, XOM, WFC, JNJ, FB, GE, JPM, AMZN, WMT, PG, etc. There are so many mid-cap and small cap stocks though that have already fallen 20% from highs and/or that sell at relatively low p/e's (or other metrics) that I find them attractive at current prices (unfortunately also when they were at higher prices too--g-).

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