*                         9/17     9/24     10/1     10/8/12
S&P 500 Index             1465.77  1460.15  1440.67  1460.93
Trailing 12 month PE      16.57    16.50    16.26    16.52
Trail Earnings yield      6.04%    6.06%    6.15%    6.05%
Forward 12 month PE       14.63    14.54    14.31    14.82
Fwd Earnings Yield        6.84%    6.88%    6.99%    6.75%
90 day tbill yield        0.11     0.11     0.10     0.11
10 year tbond yield       1.88     1.77     1.65     1.75
Arezi Ratio               0.018    0.018    0.016    0.018
Fed Ratio                 0.27     0.26     0.24     0.26

The Arezi Ratio is the 90 day tbill yield divided by the trailing
earnings yield of the S&P500. A low ratio means that stocks are undervalued.

The "Fed Ratio" is the 10 year treasury bond yield divided by the
forward estimated operating earnings yield of the S&P500. A low ratio
means that stocks are undervalued. Thus, a ratio of 0.71 for example
means, according to Yardeni, that stocks are cheaper than "fair value"
by 29%.

The 'S=120-50*Arezi Ratio' formula indicates an allocation of 119%
stocks, -19% cash this week.


Other timing indicators:
The S&P index is above its 200DMA. - Bullish
We are in the May-Oct part of the year. - Bearish
The trailing PE ratio of the S&P is below 17. - Bullish
The treasury yield curve is normal (not inverted). - Bullish

A composite allocation may start with the Arezi formula and subtract 10%
for each bearish indicator. The current target allocation is 109%.

An alternative allocation, using S=120-30*Arezi Ratio and the first
two of the other timing indicators, produces a target of 109%.

Elan