The trend on the ER is now descending but still above 1, which like you said would mean analysts are still lagging in their estimates tho not by as much. But since the trend is down, would it portend a market that will rise higher in much smaller percentages? I suppose even by common sense the market will not be rising another 50-70% from here. 10-15% more on S&P is possible at least. I like your ER. Take that with Russell’s PTI and we should do ok.

Given that we seem to have 50% permabulls expecting a V recovery mirroring 2003-2007 and 50% E-Wave expecting second 50% downleg. The contrarian position seems to be that both will be wrong.

I agree with Louise Yamada and long term K Wave analysis that this is a secular bear market starting in 2000 following the 1929-1942 scenario. This predicted the 2008 crash (aka 1937) and predicts a 12 mn plateau around Dow 10K to 11K before more downside. Interestingly this also sets up a huge head&shoulders for the Dow.

The trend is very important, but readings above or below one are most important. Any reading above 1 shows a positive change in the ratio meaning that analysts are still behind the curve. Vice versa for a reading below 1. The trends in the ER, however, tend to be multi month or quarter moves so it’s important not to ignore the trend. For now, the figures remain robust, but analysts could easily begin to overshoot (get too bullish) in the coming quarters as the trend is showing a very quick change in analyst sentiment.

The ER has been telling me not to short this market all year and it has been correct. It would have been nice if I’d had a bit more conviction in the indicator early this year (and been fully investor all year), but I think the extreme nature of this market and downturn made risk management and prudence the right call at the time. Hindsight is always 20/20 though, huh?

Please excuse me for asking what might appear to be the obvious. How exactly should I read your ER chart? Which numbers are considered negative or positive/ bullish/bearish?

http://pragcap.com/early-earnings-analysis

Please don’t take offensive at this, but this site often seems to mirror the daily market action (trend) just like the MSM. The past couple of days when the market was down almost all the posts were bearish. Today with the future and now the market up, the posts so far are all more or less bullish.

I have always found it interesting that CNBC has Rosenberg, Pretcher, and other bears on when the markets are down. When the markets are up the bears are rarely to be seen.

TGP is much more balanced, but on a day-by-day basis there appears to be a similar correlation.