Wednesday, February 25, 2009

'Tis Not the Season

I don't know. Usually, my editor comes up with much better headlines than I do but today I liked mine better. Perhaps his non-technical analysis mind did not get the reference. C'est la vie (from a non-French speaker, that's what you get).

Anyway, it looks like seasonals are shot to bits. What else will get shot down? The Kitchin cycle (4-year)? The 9-month cycle? How about the 28-day cycle Wells Wilder found for gold and based RSI around?

Tidbit - the 14-day parameter we all use because that's what came with the software is a half cycle in Wilder's research. Did you think the makers of Computrac and Tradecenter invented the number?

More reason to sit back and watch everyone else struggle.

What really makes me laugh is all the fundamental guys telling us the S&P is overvalued because projected earnings are 50 bucks or some such number. Do you think any of them have a clue about where a company will be earnings-wise nine months out in a financial meltdown? At least the charts are telling us how investors are putting their money where their fear and greed are.

I'll take shaky technical tools over fundamentals in a time of crisis every time.

10 comments:

Kiyoshi said...

Amen to that !

paulocuana said...

"Actual" twelve month trailing earnings on the S&P 500 are only available through 3Q 2008. The 4Q is still coming together. Those actual earnings were $45.95.

At a PE ratio of 15, arguably average, that's 689 for the index.

Projected earnings are much worse.

Amalan said...

The question is if those projected earnings are way too pessimistic. At the beginning of a bear the projected earnings are way too optimistic, but at the end of the bear, the projections turn out being too pessimistic, hence the possibility of upside surprises. I don't know for a fact that the "street" has been pessimistic enough to cause the over-reaction, but I do see some companies showing up with better than predicted earnings.

On the other hand, we should also admit that the dividends on any stock or index is also possibly an overestimate at present. Many are beginning to slash dividends to preserve cash.

gingersue said...
This comment has been removed by the author.
gingersue said...

Be careful to seperate "reported earnings" and "operating earnings" of the S&P before slapping a P/E on to it.

paulocuana said...

Quite right. I'm talking about GAAP earnings.
http://www.decisionpoint.com/TAC/SWENLIN.html

gingersue said...

paulo, thanks for that link. Very useful. It reinforces my belief, all things considered, that a 5 handle on the S&P is a good place to start buying.

patrick neid said...

CompuTrac !?!?

I have not heard that name in eons. I still have the chip/member number 323 sitting in my Apple II on the top shelf of my closet circa 1981(?). The software came on a chip that you inserted into the i/o game port on the motherboard. I ran that software for eleven years printing my charts each day combining it with my Commodity Perspective charts which I hand updated everyday also.

What a trip down memory lane.

Quick Takes Pro said...

Patrick,

Welcome to Dinosaur-land. ;-)

patrick neid said...

"Dinosaur-land"

LOL...