Stocks This Cheap Only Two Times In 26 Years


October 16, 5:00 pm EST

Stocks are racing back, just as everyone is turning gloomy. 

This squeezes the shorts that have been looking for reasons to believe a big trend change is coming for stocks, depite the fundamentals that suggest the opposite.

We now have this chart on the S&P 500 ….


Which is beginning to look like this (below) V-shaped move in stocks back in late 2014. And it was right around the same time of year.

This 2014 correction was 17 days, and -9.8%.  It was all recovered in 13 days.  Now we have a 7.8% decline over 14 days, and bouncing aggressively.

The more important chart for the benchmark S&P 500 index, is the longer term one below – which shows the big “Trump-trend” continues to hold.  The yellow trendline represents the ascent of stocks following the Trump election, which has been driven by pro-growth economic policies.

And with this above chart in mind, remember as we discussed yesterday, from a valuation perspective, Wall Street is estimating stocks on next year’s estimated earnings to be as cheap as we’ve seen only two times in the past 26 years.

Again, if we take the 2019 estimate earnings on the S&P 500 of $176 and multiply it by 23, we get 4,048.  That’s 47% higher than Friday’s close.  Today we closed at just 2,810.

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