Bull Bear Argument.

The push pull of the stock market can be viewed in the current bull bear argument.

Bulls: Current consensus estimates for the S&P 500 in 2007 are between $95.30-95.40. Assuming a midpoint average of $95.35, then stocks are trading a about 14.71x their 2006 estimates. Assuming a 16.5 PE on this number gets you to 1570-1580 range on the S&P 500 next year or a gain before dividends of approximately 11%.

Bears: If the economy slows much more than its current rate then corporations will not be able to achieve their estimated earnings for next year. Therefore this S&P number is too high and the market must either decline to match the earnings or trade at a much higher PE than its traditional average. This is possible but unlikely in our current economic environment.

I don't know which of these vies is likely to prevail next year. Certainly Wall Street's predictive skills are no better than my own. But I do know that our money flow analysis will at least likely give us a heads up if and when the market changes from it's current bullish stance to a more bearish scenario. Unless some unlooked for event hikes over the transom there should be plenty of time to react to a change in the wind.