Every other time in history when the DOW has traded above 20x earnings, it's corrected to BELOW 10x earnings in the bear market. (From memory, the average bottom has been at about 8x earnings).
... and in almost every case, earnings have fallen considerably in the bear market.
If we were to apply the lessons of history to the S&P500, we should expect a minimum bottom at approx 250 points.
S&P500 currently earn $35... we can assume that earnings will fall to $25 over the next few years (optimistic), and that it will bottom at 10x earnings (also optimistic judging from history).
ie. 25x 10 = 250 points.
A more realistic case would be for earnings to fall to $15, and for the index to bottom at approx 6x earnings... which would allow a bottom at 100 points.
This is a long way below current levels!!!
Don't believe my facts??
Check the last 100 years of data for yourself !
A similar fall in the DOW would place it well below 1,000 points- which is where i think the ultimate bottom will be.
