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Friday, October 19, 2007

Elaine Garzarelli is Bullish: Indicators on a Strong Buy Signal

Today Elaine Garzarelli is very Bullish with her Indicators on a 75% Strong Buy Signal.

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.

Click Graph to see it full sized

Kirk Lindstrom's Investment Letter Performance

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