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Strategies & Market Trends : Value Line Investment Survey
VALU 37.51+1.9%11:47 AM EST
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To: EL KABONG!!! who wrote (143)8/2/2006 10:43:11 PM
From: OldAIMGuy   of 219
 
Hi EK, Re: Looking Forward...............

My own indicators that are derived from Value Line data are showing a "split decision." First is Relative Valuation - a combination of current short term interest rates and Value Line's P/E:



Here we see that interest rates have overwhelmed the P/E drop keeping the indicator in BEARISH territory. This has been a very reliable indicator since starting the data collection in 1982. Earnings need to get better or prices need to drop to get the P/E down. We can't expect interest rates to drop, so the pressure's on the P/E side.

I think this really shows where there's a ceiling on the the market's potential more than it does any certain threat. Lack of upside potential can be hard on investors in a different way from downside risk.

Now, here's the other component based on Value Line data. This one is derived from their 41 Best and Worst Performers lists (last 13 weeks, Page 33 of the Index section):



Here we see a bit more optimistic view of the market. Again, since 1982 this indicator has been able to call near term market bottoms pretty well. There's very little speculation around in much of the large cap sector. Even the expanded edition shows lower speculation than in a long time.

If you would like to read a bit more about these ideas, there's the weekly freebie newsletter at
aim-users.com

and further historical info at:

aim-users.com

There's a bunch of tech stocks in the Worst Performers list that shows it to be somewhat over-sold. I'd think that would be some happy hunting grounds for those interested in bargain shopping.

Best regards, Tom
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