Investing Trends

For the last few hebdomads we have got seen the stock market averages going higher and higher each hebdomad yet the economical intelligence is still very bad. Are this bear market coming to an end? Volition the stock terms and common finances travel back up to where they were?

It looks all the talking caputs on television and the talking radiocommunication cats are telling you that now is the clip to purchase because the market will be much higher next year. "You can't afford to not be in the market" is the cry. They have got tons of grounds that sound good, but almost none of them will throw H2O upon stopping point analysis.

The 1 thing that I hear is that the market is now "fairly valued". Now the S&P500 index have a P/E ratio (that's Price/Earnings) of around 32 that agency it will take 32 old age to get back your money based on what the company's stock is earning today. It doesn't take a rocket man of science to recognize there are many other topographic points to get a better return. There are many, many pillory with P/E ratios in the 100s and others that have got no earnings at all. That doesn't intend those pillory won't travel up; it intends they won't remain up once people recognize they have got no value other than anticipation. That is why the Nasdaq have declined 75% sol far and it is still over priced.

The Wall Street aces state that adjacent twelvemonth earnings will be much better so the terms today is cheap compared to what it will be then so you better purchase now. When you travel back in clip you will see that the average P/E for the S&P500 index have been 14 - 15 for many years. Could that average that "this clip it is different" or is the index over priced by 200%?

Forty percent of the advance in stock terms is owed to directional motion of the market as a whole, 40% owed to the strength of the sector that it is in and 20% owed to the quality of the company itself. You see, just because it is a "good" company makes not intend the stock will advance. Birds of a plume flock together so the "good" company must be in a strong sector that is advancing and then the whole market must be advancing also. When you have got got all 3 of these things going you have a good opportunity of making money.

Where are we today? You must step back to take a long position of the market indexes. The terms action of the past few hebdomads cannot be counted as the market tendency as a whole. Most market technical analysts state that the market is in a mass meeting form of a long term bear market and that the mass meeting will hold and caput down somewhere near the 200-day moving average that is currently at about 10,300 on the DOW.

Is the bear back in his cage? Have the bull market returned? It depends upon who you desire to believe but whatever you make you should be protecting your capital with trailing stop-loss orders on your pillory and mental Michigan for your common funds. Even those with IRAs and 401Ks can travel their money into a money market account should the market start down again.

Time will tell.