WHAT to buy
Used by value investors. Focuses on financial statements.
WHEN to buy
Used by day traders. Focuses on daily price movements.
Often mocked as "astrology for men".
Indicators
- Relative Strength Index (RSI)
- Moving Average Convergence Divergence (MACD)
- Bollinger Bands
- VWAP
- Stochastic
Earnings yields = 1 / PE ratio
Example:
S&P500 PE ratio of 28.82 has an earnings yield of 1/28.82 = 0.034 i.e. 3.5%.
A 3-month US treasury bond has a yield of 4.3%.
You have a guaranteed 4.3% vs a potential 3.5%... This means that the stock market is overvalued and you should sell because it will go down.
This is exactly the same as running a huge business with 2% net profits, whereas a bond wound have been DOUBLY profitable. It's more profitable to close it.
You have a guaranteed 4.3% vs a potential 3.5%...