DECISION POINT
OVERVIEW OF MARKET FUNDAMENTALS
Friday  2/3/2012


*************************** S&P 500 FUNDAMENTALS ****************************

The real P/E for the S&P 500 is based on "as reported" or GAAP earnings
(calculated using Generally Accepted Accounting Principles), and it is the
standard for historical earnings comparisons. The normal range for the GAAP
P/E ratio is between 10 (undervalued) to 20 (overvalued).

Market cheerleaders invariably use "pro forma" or "operating earnings,"
which exclude some expenses and are deceptively optimistic. They are
useless and should be ignored.

The following are the most recently reported and projected twelve-month
trailing (TMT) earnings, quarterly earnings, and price/earnings ratios (P/Es)
according to Standard and Poors.

                                             Est       Est       Est       Est
                               2011 Q3   2011 Q4   2012 Q1   2012 Q2   2012 Q3
TMT P/E Ratio (GAAP).......:     15.50     15.10     14.40     14.10     13.80
TMT P/E Ratio (Operating)..:     14.20     13.90     13.70     13.50     13.30

TMT Earnings (GAAP)........:     86.98     89.03     93.11     95.24     97.73
TMT Earnings (Operating)...:     94.64     96.90     98.50     99.72    101.48

QTRLY Earnings (GAAP)......:     22.63     22.72     25.52     24.37     25.12
QTRLY Earnings (Operating).:     25.29     24.19     24.16     26.08     27.05

For a more thorough discussion of earnings and other fundamentals
click here.

Based upon projected GAAP earnings the following would be the approximate
S&P 500 values at the cardinal points of the normal historical value range.
They are calculated simply by multiplying the GAAP EPS by 10, 15, and 20:

                                             Est       Est       Est       Est
                               2011 Q3   2011 Q4   2012 Q1   2012 Q2   2012 Q3
Undervalued (SPX if P/E = 10):     870       890       931       952       977
Fair Value  (SPX if P/E = 15):    1305      1335      1397      1429      1466
Overvalued  (SPX if P/E = 20):    1740      1781      1862      1905      1955


*******************  COMPARISON OF MAJOR INDEXES  ***************************

                                  SPX     OEX     NDX    DJIA    DJTA    DJUA

Price/Earnings Ratio........:      15      15      23      14      21      14
Dividend Yield..............:    2.0%    1.6%    0.5%    2.4%    1.4%    4.0%


*********************** DIVIDEND VALUE RANGE ANALYSIS ***********************

The yield for the DJIA, DJTA and the S&P 500 has historically moved
between a range of 3% (overvalued) and 6% (undervalued). The normal yield
range for the DJUA is between 3% and 12%. Decision Point expresses this
range as an RVR (Relative to Value Range) value of between 0 (undervalued)
and 100 (overvalued). Values can fall outside that range, and, when they
do, indicate even greater extremes of market valuation.


                                     S&P 500     DJIA     DJTA    *DJUA
-----------------------------------  -------    -----    -----    -----
Current Closing Price.............:     1345    12862     5369      451
Current Yield.....................:     2.0%     2.4%     1.4%     4.0%
Current P/E.......................:       15       14       21       14
Current Payout Ratio..............:      0.3     41.8      0.3      0.6
Current RVR.......................:      134      120      154       89

Price at  1.5% Yield..............:     1793    20579     5011     1203
Price at  3.0% Yield (RVR 100)....:      897    10290     2506      601
Price at  4.0% Yield..............:      673     7717     1879      451
Price at  5.0% Yield..............:      538     6174     1503      361
Price at  6.0% Yield  (RVR 0).....:      448     5145     1253      301
Price at  8.0% Yield..............:      336     3859      940      226
Price at 12.0% Yield  (RVR 0 - DJUA).........................:      150


*********************** MISCELLANEOUS MARKET MEASURES ***********************

DJIA Yield.............:    2.39%  Bearish  (Norm Rng: 3% - 6%)

DJIA P/E...............:    13.64  Neutral  (Norm Rng: 10 - 20)

T-Bill Yield/DJIA Yield:     0.03  Bullish  (Norm Rng: 1.6 - 2.0)

Price to Dividend Ratio:    41.84  Bearish  (Should be less than 30)


*****************************************************************************

The chart below offers perspective regarding current S&P 500 P/E and yield
relative to normal historical ranges.





*****************************************************************************

HUSSMAN P/E

The chart beloww calculates the SPX P/E by dividing the SPX price by Prior
Peak Earnings, a method developed by John Hussman, manager of the Hussman
Funds. (hussmanfunds.com) It orients valuations to the long-term
rising trend of earnings growth as defined by peak-to-peak earnings.





*****************************************************************************

End of MARKET FUNDAMENTALS REPORT for Friday  2/3/12

Copyright 2012 Decision Point.