RE: [CANSLIM] Alexander Elder's Book

From: John Kruger <jokguger@yahoo.com>
Subject: RE: [CANSLIM] Alexander Elder's Book
Date: Wed, 19 Dec 2001 12:07:18 -0800 (PST)

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[From Alexander Elder's most recent newsleter]

CHEAP OR DEAR?

Even a technical trader should keep an eye on the fundamentals.  One of
the key fundamental indicators of the stock market is PE, or
price/earnings ratio - the price of the stock divided by its earnings. 
The price is clear, but earnings are a little foggier, as any
accountant can tell you.  There is quite a lot of room for creativity
in that department, but as we move from the individual stocks to the
market as a whole, the PE ratio becomes more and more objective.

High PE ratios are indicative of bull market tops.  During the dot-com
boom, many stocks had a PE over 100.  Low PE ratios are indicative of
bear market bottoms.  For much of the second half of 20th century, bear
markets ended after broad market PEs fell to 10 or 12.

So, where are we today - close to the top or to the bottom?  I was
discussing this concept the other day with one of my campers, who is a
serious professional trader, and he was kind enough to send me two
valuable links - http://www.stockselector.com/sp500.asp and
http://www.comstockfunds.com  It would be easy for me to tell you what
the score is, but check them out and see for yourself.  And after you
look, recall those Russian stocks that I described in these letters a
month or so ago.  Many of them have PEs in the single digits!

Now, if you start combining this sort of information with technical
analysis, such as the slope of a 26-week exponential moving average,
you
will be developing tools that very few traders have.  Combining a basic
understanding of the fundamentals with modern technical analysis puts
you miles ahead of your competitors with their hunches and tips.




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