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Technology Stocks : Semi Equipment Analysis

SOXX 312.18

-0.2%

Dec 9 4:00 PM EST

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To: Proud_Infidel who wrote (30392)	5/12/2006 8:59:10 AM
From: Return to Sender	Read Replies (1) of 95546

First according to the QQQQ RSI(5) system there is a current buy signal as of yesterday but the volume on the sell off indicates more selling ahead: investorshub.com Second the P/E ratio of the S&P 500 is reported in a lot of different ways. Projecting what it might be in 2007 is easy but will it actually be what is projected? Currently the P/E ratio was lower than it has been for many years but it is still historically high. tal.marketgauge.com tal.marketgauge.com The most basic measure of stock market value is price relative to the latest 12 months' earnings - the P/E ratio. In bear markets, investors terrified by bad news can drive the S&P 500 P/E ratio to under 10. In the 1974 bear market, this ratio dropped to 8 with many securities trading with even lower multiples. In bull markets, extreme optimism can drive the market's P/E to 25. In the 1995 bull market, many technology stocks were valued at over 50 times their prior 12 months' earnings, while the ratio for the S&P 500 fluctuated between 16 and 20. Calculation & Significant Levels S&P 500 Price/Earnings Ratio: Calculated by dividing the earnings over the latest 12 months' of the S&P 500 Index into the cash price of the index. A market P/E of 18 or higher is usually considered a sign of overvaluation. When the S&P 500 P/E drops below 10 the market is historically undervalued. Formula: (S&P 500 cash index price) ---------------------------------------- (S&P 500 index prior 12 months' earnings) Gauge Elements: Magnitude Updated: Weekly (as of Friday close) Strategy It is important to consider where the economy is in the business cycle before interpreting the market's P/E. Bull markets are often born out of recessions when earnings are depressed. Therefore, in the early stages of a bull market this ratio can exceed 18 as investors anticipate increasing earnings. However, a market P/E over 18 in the later stages of an economic expansion is a warning of overvaluation. When this ratio dropped below 12, the long term investor has found good buying opportunities. In my humble opinion the market is not cheap. Although it could rally today, tomorrow or any time the odds after a high volume sell off with previous highs set as they have been are good that the market will work lower first. Be careful. Better buying opportunities ahead. JMHO, RtS

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