Slope of Hope: Click to View

While the indicator resembles a moving average, the S&P projected price tracks the S&P 500 average of monthly closes price relatively well. The calculation involves using an average Price to Earnings ratio for the same time period and multiplying that by the average earnings (for the mathematically oriented, insert the word “mean” into the “average” spots). To extend the projection out to December 2015, we use the average earnings growth using 1989 to present quarter over quarter change in growth.

However, one must be leery using “earnings forecast” because these are normally downwardly revised and exogenous events (such as we saw in 2008) may dramatically change earnings.

Image added from advisorperspectives.com/ds...ojections.php

Comments

Jesterx - Stop Losses Rule!

justu look how accelerated this bull market is, it beats the arse off the last one, and we all know what happened to that titanic and iceburg. LOL 8/23/14

Jesterx - Stop Losses Rule!

The thing is people have been writing off this market since 2010, and right now I am in the sloper mentality and have been writing off the market for the last 3 weeks, with little results. Its proof what we as trader should be doing right now, and even better as in the NOW what the path of least resistance is for these markets. 8/23/14

Dink

Interesting chart stack, but I'm confused by the calculation for the projected price. If you are multiplying the P/E x E, aren't you just left with a "P" in the calculation and that's why it tracks price so well...because price is all that is left in the calculation? 8/25/14