Paul D. Castro, CFA

S&P 500 Down More Than 1% for First Time in 26 Days

The S&P has just recently made a higher intermediate high for the first time since last October. By my count;

08-15-07 close = 1,406.70 = higher low,
10-09-07 close = 1,565.15 = higher high,
01-22-08 close = 1,310.50 = lower low (first lower low since Nov 02 which was also the last lower low of the post-bubble bear market),
02-01-08 close = 1,395.42 = lower high,
03-10-08 close = 1,273.37 = lower low,
05-06-08 close = 1,418.26 = higher high (first since Oct 07)

What this most recent higher high means is a new uptrend (ie, bull market) has begun. The last time the S&P made a higher high after a series of lower highs and lower lows was in Mar 04. That uptrend lasted until the lower low in Jan 08 (ie, 3 yrs and 10 months). The only event that could occur which would annul the new bull market thesis would be a take-out of the Mar 08 closing low.

Current Valuations Are Well Above the Market's Historical Average

Begs the question. Which earnings numbers should one use to calculate the S&P's P/E. Operating or As Reported? Go to www2.standardandpoors....
and see that trailing 4-qtr operating earnings were $82.54. By my calculator, that makes the trailing P/E = ~16.6. The same site shows S&P As Reported earnings of $67.81 but when you click on www2.standardandpoors.... under S&P 500 the excel page that loads shows S&P 1500.