my take: nov high takes out dec high (nasdaq has already done this), dec high takes out nov high, jan 06 high takes out dec 05 high, then 2006 lows take out 2005 lows.
I take it you have no concerns that the expectation of yet another "Santa Claus" rally is becoming a crowded trade.
Seems like every other market in the world has broken out to new highs for the year except the US. Earnings continue to come in strong at double digit increases. I'm amazed by the resiliancy of this economy: hurricanes, scandals, blowups, war, terrorism, higher interest rates, increasing credit card minimums, tighter bankrucpy laws - the ponzi scheme seems unbreakable. I think the only that can bring down this economy is interest rates. Correct me if I'm wrong but I think the PE for the S&P is about 16 which is 6.66% (scary number) yeild if all earnings were paid out as dividends (will never happen). Now if interests rates climb above that or close to that level - then why take all the additional risk with stocks if you can get a risk-free equivalant yeild with money sitting in the bank.
I'm completely agnostic about the next direction the market takes. In the short term though I am bemused by the level of bullish sentiment. However you are correct. By historical "bubble" standards, the market is not expensive. That's the hallmark perhaps of climbing a wall of worry.
Chewy, that first chart with P/E ratio for the last 80 years or so really tells that tale. I would think that even the most basic chartist can see that a regression to the mean is in order here. The people that don't want to hear that seem to me to be the same one's saying that P/E 'didn't matter anymore' in 99/2000 because it was and 'old metric' , lol. Not to mention interest rates have been to low for to long and everyone knows it..."Cash is King" is coming back.
Why do you think regression to the mean is in order, and where is the mean in your opinion? From your channel lines I'd think that the market should go down more. Could you post a link to a web page that explains how this regression to the mean works in the markets? Also, interest rates were low, but at 4% they're not that low anymore. Energy costs are soaring. Budget deficit too. Give me some other arguments. Here there is Van K Tharp's October 31st 2005 Market Update. He has a different take on the market.