Elaine Garzarelli is one of the few analysts that called the 1987 bear market and got out before the crash 20 years ago today. (See 20 Years After Black Monday: October 19, 1987)
During a CNBC interview today, Elaine Garzarelli had this to say:
- Market in '87 was 35% over valued
- Today it is 28% under valued
Her indicators today are at 75% for a major buy signal
- 1987 they were at 9%
- Below 30% is a sell signal
- Above 65% is a MAJOR buy signal
Elaine has 14 indicators in 4 areas with 25% weighting for each area. The areas are:
- Economic Cycle: Earnings will bottom this quarter and next. Near the bottom not the top. Bullish
- Monetary Policy: Fed is easing. Before the crash the Fed was raising rates; Bullish
- Valuation: Market via the Fed Model is 28% under valued using her "Street low" earnings estimates. This is Bullish
- Sentiment: Neutral hence the 75% reading.
She thinks oil is near a peak now and will come down since everything outside the US is slowing down too. But she she said the economy could handle oil going to $125 per barrell and still grow as long as it gets there slowly.