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A measure of the value of our market

  1. eddievanhalen

    1,200 Posts.

    Just wondering if anyone else there calculates a measurable figure of value for our market. I have a formula which I use for this and which has been back-tested to the early 80's with success.

    It gives a score of 0-10 based on the value of the market taking into account a number of factors including market PE,interest rates,bond yield curve shape and the median PEG of market stocks.

    The best reading ever has been around 8 in early 1993 (it was a 7 at the bottom of the Sept 11 crash) and the worst a 1 which occurred in mid-late 2000-2001 and all the way from late 1985 to Oct 1987!!! Plenty of warning!

    Using this formula I get a reading of 5 at the moment which is considered not great but good buying and with further downside to the market this could become great very shortly.........I say NO chance of a significant correction on the Aussie market (ie 10%+).....any drop will be gradual.

    My technical system indicates the market should not close a month below 3000..........if that fails an absolute bottom at 2900.........probability suggests 3000 will hold though. This combined with my value indicator makes me feel fairly good about the Aussie market........although I have been stopped out of half of my shares in the last few weeks!!!.....just hope the RBA doesn't go too hard at % rates as this will take away some of the value I have alluded to.

    Ed.

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