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Strategies & Market Trends : P&S and STO Death Blow's
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To: Jeff who started this subject5/24/2002 5:53:16 PM
From: exp  Read Replies (3) of 30712
 
Jeff, my calculation of NDX/COMPQ Fair Values using the
calculation of NDX forward P/E done by Steve Lee:

Valuation of NDX 100 index using weighted average of top 70 components:

Current PE = 46.41
Forward PE = 36.66

Current PS = 6.97
Forward PS = 6.20


SPX forward P/E is about 20 which is around its Fair Value. Fair Value of NDX forward P/E should be in the 25-30 range to reflect the historical relationship with SPX P/Es.
So, Fair Value of NDX should be 20-30% below today's 1250:

Fair Value of NDX = 875-1000

and, similarly, given COMPQ at 1660

Fair Value of COMPQ = 1150-1300

However, in reality these values should get lower still for two reasons:

(1) pro-forma earnings are on the way out and MUCH LOWER "core" earnings will be used instead
(2) in a capitulation selloff the market goes much below Fair Values (in Sept 01 SPX dropped 17% below its Fair Value).
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