S&P 500 model summary as of November, 2006: (today's date: 11-20-06).

The S&P 500 is at 1401, up 12.1% since a year ago, up 1.7% since last month.


**BOTTOM LINE: Recommended weighting: 75% stocks ** (25% cash)
This is a moderately bullish stance.
Total return since:Model:S&P 500:Difference:
Dec-0237.5%70.8%-33.3%
Dec-9921.0%6.6%14.4%
Dec-9837.6%29.0%8.6%
Dec-9770.2%65.8%4.3%
Dec-6411.3%10.4%.8%


The model predicts an S&P 500 total return of 18.82% over the next 12 months.
This prediction is based on the following inputs:
- Predicted S&P 500 return based on SEASONAL factors: 31.6% (annualized). +++++++++++++++++++++++++++++++
- Predicted S&P 500 return based on VALUATION: 11.8%.
- Predicted S&P 500 return based on INTEREST RATES: 9.5%.

** VALUATION: **
The S&P 500 has an earnings yield of 5.3%, which translates to a PE of 18.8.

- Only 20% of the time since 1950 has the market been more richly valued.

- The predicted S&P 500 return based on PE alone is 5.3% per year for the next 10 years.*
The earnings yield is .7% above the 10 year Treasury note yield (59th percentile).
- The predicted next year return based on this indicator is 10.5%.
- The stochastic of this measure is 79, meaning it is in the upper end of its 3-year range.
The earnings yield is .4% above the 90 day Treasury bill yield (28th percentile).
- The predicted next year return based on this indicator is 8.4%.
The earnings yield is 3.1% above the inflation rate (48th percentile).
- The predicted next year return based on this indicator is 11.4%.

** Interest Rate Trends: **
30 year Treasury bond yield: 4.69%.
10 year Treasury note yield: 4.61%.
90 day Treasury bill yield: 4.95%.
Consumer Price Index, 12-month change: 2.2%.
Dividend yield, S&P 500: 1.8%.

The 30 year yield is 4.% below its 6 month moving average (14th percentile).
The yield curve (ratio of 30 year to 90 day yield) is .95.
- This is in the 10th percentile and predicts a 5.3% next 12 month return.
The 30 year yield has fallen .2% over the last year.
- This is in the 41th percentile, and predicts a 12 month return of 9.0%.
The 90 day yield has risen 28.2% over the last year.
- This is in the 78th percentile, and predicts a 12 month return of 5.8%.
The discount rate is 16.7% above its 6 month moving average.
- This is in the 77th percentile, and predicts a 12 month return of 5.6%.

** Other factors **
The S&P 500 has risen 32.4% over the past 3 years.
- This is in the 58th percentile.
- This is neutral (11-80% prior 3-year return)

Extended forecast and recommendation:
12-2006: 75% stocks; predicted return: 18.6%
01-2007: 50% stocks; predicted return: 11.0%
02-2007: 50% stocks; predicted return: 11.1%
03-2007: 50% stocks; predicted return: 11.1%


* correlation coefficient for PE and next 10-year average return based on Earnings model = .673.