S&P500 value zones identified

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arbusers
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S&P500 value zones identified
« on: March 23, 2020, 07:06:31 PM »

Covid19 represents a lethal danger for humans, but it is not unprecedented. We have seen ordeals like this in the past and in all of them humans survived.
I will plot all possible scenarios for S&P500 in a graph, and I will explain a strategy in order to create wealth on a long term basis. Of course, each and every one of us is in different circumstances and one must think for himself before making conclusions and decisions.

I identified 4 value zones depending on 3 different support lines coming from the past, some of them coming from 1987 or even before that year. At this point, no-one knows which one of them will be the stopover for the index. The picture will offer more clarity as we are nearing each zone and we observe the behavior and the psychology of investors. These are times when computers stop and humans take over. Mr. Market, with his manic-depressive character, will swing from his very pessimistic to his wildly optimistic faces.

So far we haven’t seen any capitulation in the market. We need to see capitulation before we invest our hard-earned money.

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Value zone 1 is based on a support line underpinned in 2000 and 2007. The support is very typical from the technical analysis’ view. There is a 50% downfall from the top. This 50% is a dream for every value investor. This is a zone we could invest some money.
Value zone 2 is based on a support line underpinned in 1987, 2009 and possibly 1990. This is far stronger and sneaky support. It is sneaky because it comes from very deep in the past. Usually, analysts don’t pay attention to these lines deeply rooted in the past. S&P500 has a tradition of not stopping in the lines where most people believe it will stop. This support demands a 69% downfall from the top. That would be my best guess and if achieved, some more money should be invested.
Value zone 3 is based on a support line underpinned in 2002 and 2009. This support is also very typical and easy to be identified. I believe that if the 1st support is broken, then all analysts will think of the 3rd while skipping the 2nd. It demands a downfall of 80% from the tops. This downfall should be the 2nd biggest in the history of the US stock market, right after the big depression. Again, funds should be available to be invested.
Value zone 4 is uncharted waters. Life as we know it will change there. It is not underpinned from past performance. It comes with a downfall of approximately 90%. Again money funds should be available here as well.

In the coming days, I m about to present more investing ideas and analysis on equities. As this plan is not a short term trade, I m looking for both price value and dividend performance. It is important to identify what should be bought at each line.

Please notice, the exposure should be limited as this one in a generation ordeal has a bumpy road, but a well-known destination. Firepower should be available at any point, as we don’t know when it is needed once again. The general idea behind my thoughts is to create a portfolio that will perform for years to come. This is not a short term trade.

Information is not intended to be and does not constitute financial advice or any other advice. Information is general in nature and is not specific to you. You should not make any decision, financial or otherwise, based on any of the Information without undertaking your own due diligence.

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arbusers
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Re: S&P500 value zones identified
« Reply #1 on: March 24, 2020, 05:04:52 PM »

I am now presenting a graph showing the P/E of S&P500 for the last 140 years.
Today's P/E is 18.19.
The average P/E is 15.89.
It is easy to understand that when P/E is below the green line (15.89) we have value. The lower the P/E is, the bigger the value is.

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To have a real value, we need a P/E under 15. This will be achieved at a 20%-25% lower level for S&P500. Of course, we will always have pockets of value at this height of P/E as we had pockets of value when it was 24, or even 30.

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arbusers
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Re: S&P500 value zones identified
« Reply #2 on: March 27, 2020, 03:44:39 PM »

The US heading for a lockdown rapidly. A matter of some days. Some minutes ago.
Pence: Previous modeling on coronavirus spread seems to be 'really wrong'.
Pence: We're applying China's lessons on the coronavirus
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arbusers
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Re: S&P500 value zones identified
« Reply #3 on: March 31, 2020, 09:06:17 PM »

Yesterday we had a very rare and at the same time very credible technical signal that we are in a recession. The signal is called ''The Death Cross'' and it appears when the 50 days Moving Average is crossing the 200 days Moving Average downwards.

See the following graph.

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Of course, we have seen fake signals like this in the past and the last time it occurred it was at the end of 2018 but most of the time this signal is credible according to the bibliography and the stock market practice.
To make a long story short what it tells us is that we are entering a long recession that will last for a substantial amount of time. It rejects what many believe, this is a short bear market caused by Coronavirus. If it wasn't the virus it would be something else.

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arbusers
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Re: S&P500 value zones identified
« Reply #4 on: Yesterday at 05:52:40 PM »

I would like t present a correlation I found between the 2008 and 2020 crisis. I m also attaching the typical bubble phase scheme so we have a better understanding of where we are and what will come shortly. Right now, we are in the ''Return to normal'' phase. To get the general mood, all you have to do is watch CNBC, Bloomberg, and all similar channels. Last week we have seen a parade of top bankers and officials that presented a reality where everyone is rushing to buy something before the chance flies away. The term ''Buy stocks'' skyrocketed in Google as you see in the following graph extracted by learnbonds.com

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This is an obvious sign that dump money is searching for chances and most probably already bought assets. We have not seen fear, we have not seen capitulation yet. In the following graphs, you will see the exact correlation and the phase I believe we are in right now.

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Some believe that we can't go that low according to the identified value zones of the opening post of this thread. I have reasons to believe this will be a generational chance to buy stocks. A chance that appears once every 4 generations, or once every 80-100 years. This should not be taken for granted as we need more data and facts to underpin this opinion. At this stage, I would like to show you the US jobless claims since the 60s.

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As you see, claims created a wall and they continue to climb. This is unprecedented. We don't have stats that go back to the 1920s, but it seems to me, the rate that people lose jobs is not seen before. Human loss is also immense.

The approach of the market should be an intelligent investor's approach.
The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustified pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists. Investing isn’t about beating others at their game. It’s about controlling yourself at your own game.

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CharlieSheen99
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Re: S&P500 value zones identified
« Reply #5 on: Yesterday at 09:16:47 PM »

Ok, so your advice right now is to wait some months or bet in short positions.

Are u talking just about SP500? Or every index could be in a similar situation?
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arbusers
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Re: S&P500 value zones identified
« Reply #6 on: Yesterday at 09:33:31 PM »

Shorting has nothing to do with value investing.
This thread is about S&P500. This is the biggest index globally and inevitably it influences many others.
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