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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 665.67

-0.9%

Nov 17 4:00 PM EST

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To: American Spirit who wrote (79984)	7/11/2001 1:20:20 PM
From: David W. Taylor	Read Replies (3) of 99985

>> Down 5 days in a row. When it is overdone? >> Simple stuff really. We had a bubble. We got to a place where everything was insanely overvalued. We need to do the opposite to burst the bubble. We need to get to insanely undervalued. Since we are still at roughly double the long term average P/E, we are still overvalued. There is an argument now that we are no longer insanely overvalued. We need to see the pendulum reverse until all of the stocks out there, that have survived, are so cheap that you would have to be insane not to buy them. This will only happen when sentiment switches from wild euphoria through euphoria through sanity through aversion through extreme aversion to insane aversion. Currently I am seeing the beginnings of doubt in the mind of the average investor. To me this equates to the transition from euphoria through sanity. That leaves at least three more transitions to get through before the market is a screaming buy. By the way, you can only value stocks on their fundamentals. Any measure that simple says that the actual share price looks cheap without doing any math is sheer laziness. I will probably jump in too quickly along with everyone else. It is a common fault to think that we have got to a certain place, when anyone standing further back can see that we are still miles away. When IBM gets to $40, MSFT to $20 and EMC to $7, then we will be insanely undervalued. At that time, the "analysts" on BubbleVision will be calling for further falls and the cheerleaders will already have been downsized. When will this happen? My guess is that we are still two or even three years from then. Wait for headlines that say: "CNBC anchor jailed for fraud." and "Merril Lynch analyst killed by despondent investor." When you see that level of disgust with the stock market, that will be the famous "bottom" and time to load up the truck.

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