Direction of the S&P

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
10                                         550
12                                         660
14                                         770
16                                         880
18                                         990

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.