GuruFocus Premium Membership

Serving Intelligent Investors Since 2004

Try It 100% FREE for 7 Days!

Free 7-day Trial
All Articles and Columns »

Positive Action: Expected by Value-Watchers

June 27, 2013 | About:
The rally did not surprise value investors.

The market’s 5% pull-back combined with rising corporate earnings had driven the Standard & Poors 500’s trailing 12-month P/E to a lower level than at its dead low last November.

The previous five times the broad index touched, or broke below, its 50-day moving average we experienced significant v-shaped rallies. The most recent low was the most extremely oversold condition since last November.

That was especially true in the Nasdaq where Apple (AAPL), the largest single component, had tainted the overbought/oversold level to really bearish readings.

The chart was generated pre-opening on Wednesday, June 26, 2013.



Chart Source: Helene Meisler Real Money Pro @ The

Buying when others are panicking feels scary. It almost always turns out to be the right move. Note the correlation of grossly oversold conditions and the S&P 500’s future direction over the following few months.

Extreme bearishness seems to provide a better guide (fewer false signals) than do the very overbought conditions.

See my Value Investment newsletter here

Dr. Paul Price June 27, 2013

About the author:

Dr. Paul Price

Visit Dr. Paul Price's Website

Rating: 2.7/5 (9 votes)


Please leave your comment:

Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial