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DJIA Drops Almost 1000 Points As Stock Market Tries to Bottom

Today, April 22, 2022, the stock market suffered a serious defeat, with the Dow Jones Industrial Average (DJIA) down almost 1000 points (981) on the day, a decline of 2.8% (to close at 33,811).

But “the Dow” isn’t a real indicator of the stock market. In America, the S&P 500 Index is the real market indicator. Today, the S&P was down 2.8% as well, to close at 4272.

The S&P 500 is now 4272. It closed 2021 at 4495. So year-to-date the S&P is down 5% for the year. My Fair Value is 3955, or 7% lower than today.

The Stock Market in a Nutshell

The stock market sells for a “multiple” of earnings (annual profits). This multiple is usually 15 to 20, depending on interest rates.

Here’s a table of the market’s “multiple” based on the median price of the index during each year during the past ten 0eyars. Below the Fair Value line, is the Current state of the market (what things are today), and also  2022 Est. and 2023 Est. are where I think the market is going.

In a “nutshell”, the stock market is still 7% overvalued. Not bad. Last week it was 13-14% overvalued. Also, it seems like the market might be around this level next year, which would be a year of churning.

Chart of the Day

Here’s a ten-year chart of the S&P 500. I inserted two arrows:

  • The top arrow is my Fair Value on what I feel the market’s worth, 3955 (7% lower).
  • The 2nd arrow is the 40-month moving average of the index, which is 3721 (13% lower).

It seems like the market needs to decline another 10%-or-so to reach bottom.

What the stock market needs is a day when 90% of the stocks in the New York Stock Exchange decline on the day. That will flush out the weak investors. Today, the reading was 87%.

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