Dave Rosenberg in his “Breakfast with Dave” for Thursday, May 20th points to the Shiller PE ratio:

In the past 130 years, whenever the Graham/Dodd/Shiller normalized P/E ratio goes above 20.6x (it is 21x today), the market experiences a significant correction – a correction of 31% on average over the next 16 months. It never fails.

It never fails… hmmm, 31% down on the S&P from here would put the S&P down to about 770.

Zero Hedge has pointed to the heavy program trading of Goldman of late -much of it apparently for their own account.  We obtained the weekly data for program trading volume as a percent of NYSE volume through the week of 4/6 from the NYSE website to examine it for a possible relation to overall stock price levels.  Below is that chart from December, 2003 forward and a chart of the S&P for comparison. It appears to us that when program trading reaches peaks exceeding 40% of total volume, S&P prices are due for a change.  Apparently, when the only ones trading (relatively speaking) are the program traders, the rise (or fall) can not long be sustained. However, the more common peaks that exceed 30 or 35% are a little less informative.  In our opinion (we do not give investment advice), if next week’s data indicate a rise to the 35%+ level, it may be confirming other indicators that a change could be imminent.



The S&P 500 index suffered a net loss of $180bn, or $20.70 a share for fourth quarter, according to S&P.  This is the worst performance ever, with records going back to 1935.  Apparently, analyst’s forecasts are not yet conservative enough for first quarter either…look out below!   See FT article