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Investors Capitulate
Big stock selloffs on huge trading volumes flush out the sellers and leave stocks in stronger hands. We've certainly had many days of sharp declines, but John Buckingham, of Al Frank Fund, notes that volumes on down days have not yet been huge.
Everyone Is Negative
Investor sentiment turns extremely negative and cash parked on the sidelines starts to pile up. Cash as a percentage of stock-market capitalization is at its highest level in decades, according to Pimco, and sentiment is certainly gloomy.
Stocks Are Supercheap
Price-earnings ratios for the market as a whole reach an extreme low, such as 12, although a single-digit P/E is an even better sign of a bottom. The P/E of Standard & Poor's 500-stock index recently stood at 14, based on analyst expectations of 2009 profits. The problem here is that it's virtually impossible to predict 2009 earnings for many companies inside the index.
Bonds Behave
The spread in interest rates narrows between Treasury bonds and corporate bonds. That has not yet occurred, in part because credit markets are still not functioning smoothly.
POSTED BY: Dan (December 02, 2008 05:51 PM)
Am I reading this correctly, that we're 1 out of 4 for signs of reaching a market bottom?
POSTED BY: Loyd Ford (December 16, 2008 01:53 PM)
No matter if we are near the bottom or still seeing difficult adjustments up and down, most people should be very careful. Do your research, buy quality companies if you buy stock. God is in the details. Most still recommend 20th Century Emergency Fund numbers like 3 to 6 months. The truth for the 21st Century? 15 to 18 months. You'll be glad you did....
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