The chart (proprietary) is astonishing, the plummet to this level crashlike, but until it turns up and I get additional data I do not want to imply this low reading will be the low reading or guess when it turns up. The weekly MA did, but then turned down again, so I am sticking with the monthly less subject to any whipsawing.
You could argue that at these levels DOWN THE ROAD you will make money as the market trend OVER TIME is up, but as I have tried to show over long secular bear markets (which contain wild cyclical bulls) it is a destroyer of values, and returns can be meager at best.
Bottom like readings in different areas, like almost 0% on 3 mnth tbills, record VIX, put call ratios near extremes add to the consideration. But we have just broken on the close the OCT 2008 lows with a higher VIX, so we want to see fear dissapate, mistakes are make thinking a HIGH fear level is enough to call a bottom, we need to see the trend of rising fear ended.
Here is some data to chew
7506 low of day OCT 2008 lows broken
HISTORY LESSON
7532 Reaction low of 2002
7500 closing low sept/oct 2002 (+ or -)
7416 2003 reaction low
7197 2002 reaction low
http://stockcharts.com/h-sc/ui?s=$CYC:$CMR&p=W&yr=8&mn=6&dy=0&id=p74150163626&a=147023766 new low here for this bear
How do you tell that all the hedges and forced selling is over? lower prices bring additional MARGIN CALLS and more forced selling.
On long term dow chart I see some support near 7,000, then it's down to 6,000 IMHO
http://stockcharts.com/h-sc/ui?s=$INDU&p=M&st=1970-10-01&id=p42793130881&a=147023808
Current environment is NOT condusive to support for SPX 500 earnings and hence expanding PE ratios.
ADAM HAMILTON OF ZEAL on DIVIE YIELDS AND BOTTOMS
http://www.zealllc.com/2003/dividend.htm
As discussed in “Long Valuation Waves”, dividend yields in the last century averaged about 4.6% for the general US equity markets. In all the graphs in this essay 4.6% is marked as fair value. Unlike valuations based solely on earnings, like the venerable P/E ratio, there is an inverse relationship between general dividend yields and general stock-market over or undervaluation.
When stocks are cheap they have high dividend yields, they pay out a relatively high percentage of their share price each year to their owners in cash dividends. The cheap level is arbitrarily marked in these graphs at 6%. As you examine the graphs, carefully observe the white 48-month moving average (48mma) of the dividend yield as well as the blue raw dividend yield itself and you will note that stocks generally rally in future years after cheap dividend yields around 6% are witnessed.
Conversely, when stocks are expensive they have low dividend yields. Their share prices are bid up so high that their annual cash dividend payments to their owners become relatively small in comparison. In these graphs, we marked 3% as the arbitrary expensive level. Once again, as you digest the graphs below you will note that stocks usually enter secular bear markets or trade sideways for years after expensive dividend yields around 3% are witnessed.
**Current SPX 500 yields near 3.57%
I cannot predict exactly WHERE the bottom will be, and those following me hopefully have sidestepped this destruction but we do have history as a guide and when paid 6% plus to hold a stock, IF dividend is not cut can make huge difference when considering risk.
With play money there surely do appear to be some stocks worth considering, but in a fast moving market, with fear staying at historic elevated levels, trying to pick a btotom comes with some risk.....
IMHO I think the 2002 reaction lows are possible, and have figured a break there to maybe 6,000. We could be VERY close, and it always matters how long your willing to hold, but at very least a LIST of gems uncovered by the bear is a start in your quest to pick up some pieces.....when ready if you have raised cash to be able to do so.
This environment as people lose jobs could get worse, but at some point the market will begin to discount the end game.
Duratek
No comments:
Post a Comment