Turning Points C

I was dissatisfied when I looked at a P/E10=8 Normal Market. The turning point estimates were not as good as I would like.

This time, I extended the period to a full 30 years. The results were much, much better.

Scenario Surfer Conditions

I set the Scenario Surfer to a P/E10=8 Normal Market. I determined how P/E10 varied over the next 30 years.

Turning Points Data

Run 1.
Highest P/E10=57.1.
Year 30 P/E10=15.8.

Run 2.
Highest P/E10=20.6.
Year 30 P/E10=14.8.

Run 3.
Highest P/E10=20.1.
Year 30 P/E10=10.2.

Run 4.
Highest P/E10=30.2.
Year 30 P/E10=14.3.

Run 5.
Highest P/E10=24.9.
Year 30 P/E10=20.8.

Run 6.
Highest P/E10=49.7.
Year 30 P/E10=27.0.

Run 7.
Highest P/E10=31.2.
Year 30 P/E10=21.2.

Run 8.
Highest P/E10=17.1.
Year 30 P/E10=14.4.

Run 9.
Highest P/E10= 18.5.
Year 30 P/E10=12.7.

Run 10.
Highest P/E10=21.3.
Year 30 P/E10=8.9.

Data Summary

Highest P/E10=57.1, 20.6, 20.1, 30.2, 24.9, 49.7, 31.2, 17.1, 18.5, 21.3.

Year 30 P/E10=15.8, 14.8, 10.2, 14.3, 20.8, 27.0, 21.2, 14.4, 12.7, 8.9.

Data Analysis

The highest value of P/E10 ranged from 17.1 to 57.1. The middle values of the highest P/E10 were 21.3 and 24.9. [The median was 23.1.]

The Year 30 P/E10 ranged from 8.9 to 27.0. The middle values of the Year 30 P/E10 were 14.4 and 14.8. [The median was 14.6.]

Conclusions

We can use P/E10=8 Normal Market data to estimate turning points if we use the entire 30 years of data generation.

A market top is likely to be close to P/E10=23.1. [This matches the historical record well.]

By Year 30, there will be a lot of randomness. On average, the market returns to normal (P/E10=14.6 compared to P/E10=14).

Have fun.

John Walter Russell
February 7, 2009