Confluences

Shiller PE Ratio Confluences

Valuations are most powerful when they converge with these macroeconomic and technical indicators.

• Macroeconomic Cycles: Compare CAPE levels with interest rate cycles; high valuations are often more sustainable when rates are low, but highly dangerous when rates begin to rise.
• Price Action Structure: Look for "Head and Shoulders" or other reversal patterns at the top of price action when CAPE is in the Extreme Overvalued zone.
• Yield Curve Correlation: Valuation extremes often precede economic shifts; a CAPE "Extreme Overvalued" signal combined with a yield curve inversion is a high-conviction warning sign.
• Relative Valuation: Compare the S&P 500 CAPE to other asset classes or international markets to find the best relative value for capital allocation.