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Strategies & Market Trends : Buying SPLITs and other Strategies
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From: Terry Whitman9/25/2008 10:45:12 AM
3 Recommendations  Read Replies (3) of 1163
 
INFLATION ADJUSTED S&P 500 BEAR MARKET TARGET LEVELS:

Instead of doing a Weekly Chart Read this week (I guarantee U that the scores remain terrible)-
I've decided to post my calculations of the previous Bear cycle Inflation Adjusted values.

Most technicians will base their support levels from the previous Bear Market lows in absolute terms-
basically neglecting the effects of inflation. The indices are priced in US Dollars, and as any simpleton
can tell U, the US Clownbuck aint worth what it was even a couple of years back. The effects over 6 - 7
years are even greater.

I did two sets of calculations, One for a 3% inflation rate, which is approx. what the Gov't statistics
showed as the PPI average over that period. The 2nd set is for a higher 5% inflation rate,
which is probably much closer to the true rate.

 
3% Inflation Table
 
Bear Market   SPX Inflation
 LOW Date     Adjust. Price
   3/01           1348
  10/01           1175
  10/02            919
   3/03            927
 
 
5% Inflation Table
 
Bear Market   SPX Inflation
 LOW Date     Adjust. Price
   3/01           1557
  10/01           1337
  10/02           1032
   3/03           1030


Conclusions
- We've already exceeded the 2001 lows in inflation adjusted terms, using either rate.

- Ultimate target for a re-test of the 2002-2003 lows would be 920 to 1030, inflation adjusted..

That said, I expect the intermediate low here will hold for at least the next several months. It's bear squeezin' time..
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