Standard and Poor's Overvalued

After a 40+% gain from the March lows on sub par volume, the S&P 500 seems overvalued relative to the current conditions in the economy. With companies beating on the EPS front due to cost cutting and reduction in head cut, revenue has been for the most part has not matched top end expectations. Hence, although the worst may have come and gone, we are still not out of the woods in terms of excess in the financial markets. With this added global stimulus program, we maybe in for another bubble to burst with the Chinese Shanghai markets up over 90%.

Clearly there is a lag from what actually happens with the economy and the stock market, however if we continue to buy at this point we may find ourselves paying over what the historical value is in the market.

S&P Earnings Fall Dramatically

From ChartOfTheDay:

"Today's chart provides some perspective on the current earnings environment by focusing on 12-month, as reported S&P 500 earnings. Today's chart illustrates how earnings are expected (38% of S&P 500 companies have reported for Q2 2009) to have declined over 98% since peaking in Q3 2007, making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative."

Source: http://www.chartoftheday.com/20090724.htm?T