Arezi Ratio for Feb 28

Investing Strategies Mechanical Investing
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*                         2/7      2/14     2/21     2/28/22
S&P 500 Index             4500.53  4418.64  4348.87  4384.65
Trailing 12 month PE      22.93    22.47    21.94    22.41
Trail Earnings yield      4.36%    4.45%    4.56%    4.46%
Forward 12 month PE       20.31    19.91    20.24    20.89
Fwd Earnings Yield        4.92%    5.02%    4.94%    4.79%
90 day tbill yield        0.23     0.36     0.35     0.33
10 year tbond yield       1.93%    1.92%    1.92%    1.97%
Arezi Ratio               0.05     0.08     0.08     0.07
Fed Ratio                 0.39     0.38     0.39     0.41

The Arezi Ratio is the 90 day tbill yield divided by the trailing
earnings yield of the S&P500. A low ratio means that stocks are undervalued.

The “Fed Ratio” is the 10 year treasury bond yield divided by the
forward estimated operating earnings yield of the S&P500. A low ratio
means that stocks are undervalued. Thus, a ratio of 0.71 for example
means, according to Yardeni, that stocks are cheaper than “fair value”
by 29%.

The ‘S=120-50*Arezi Ratio’ formula indicates an allocation of 116%
stocks, -16% cash this week.

Other timing indicators:
The S&P index is above its 200DMA. - Bearish
We are in the Nov-Apr part of the year. - Bullish
The trailing PE ratio of the S&P is above 17. - Bearish
The treasury yield curve is normal. - Bullish

A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 96%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 108%.

Elan

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The S&P index is above its 200DMA. - Bearish

Shouldn’t that be ‘Bullish’?

1 Like
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bechbung,

The ‘answers’, yes it’s true or no it’s not, are replaced by bull or bear accordingly.
Since $SPX is below its 200dma, the answer given is correct.

These are not the same as the answers to the
question, ‘What is the complete statement of the bullish test?’, which may be what you thought was intended.

rrjjgg

2 Likes
4

The S&P index is above its 200DMA. - Bearish

Shouldn’t that be ‘Bullish’?

That’s a mistake. I should have changed ‘above’ to ‘below’.

Elan

4 Likes