I am presently very surprised with the markets performance. Obamacare, debt ceilings and consumer sentiment in a downtrend has this old bull a bit scared. I am taken aback by these all times highs being reached almost on a daily schedule. I am not complaining but when I am asked “what is causing this market to go up” I have to revert to an old adage “the market will continue to go up until it decides to go down”. That is somewhat useless information but I will never be accused of not telling the truth.
So let’s see where we are: the S&P 500 is selling at the highest Price/Earnings Ratio in several years. The normal P/E ratio somewhere between 17xs to 18x maybe this is driving force causing these all-time highs. Looking forward using regression to the mean formula the market could continue its upward climb for some time. I am working on what I see for next year but an upward move of another 10% would not be out of the realm of reality.
I am watching the foreign markets especially Japan and China very closely and if they continue with their improvement that has been exhibited for the past few months then a 10% upward move would be baked into the pie. I remain cautiously bullish and any pullback should be used as a buying opportunity.