When we consider the earnings level on the S & P we can estimate where the index should be based on fundamentals.
Earnings are in the $55 range currently, up from a record low.
If these earnings are maintained, we can expect the following value ranges for the S&P:
Price to Earnings level S&P Level
We believe the S&P is substantially overvalued based on fundamentals. A P:E in the 10 to 12 range is typical during a recession and implies a pull back to around 650.
Even with an average P:E level around 14, a pull back to the 750 range can be anticipated.