stocks are emphatically on sale but are they cheap markdowns are not always the same as bargains much depends on the original price and quality of the goods and even with last weeks price drops on wall street its tough to say yet that the market is broadly cheap but value seems to be emerging in some corners of the market possibly rewarding the hunt for good deals as part of the everything must go clearance event of the past several weeks the speed depth and breadth of the price declines after last weeks 58 loss in the s  p 500 taking its overall decline to almost 24 has created rare extremes in selling persistence and oversold readings a week ago this column asked if market conditions had gotten so bad its good based on the likelihood of a reversal concluding things were probably not quite there in a comprehensive way but now by a variety of measures were very close making a meaningful bounce more likely very soon washed out the percentage of s  p 500 stocks trading above their respective 50day average heading into fridays session was essentially as low as it gets comparable to readings from significant market lows going back 20 years importantly the comparable tally of stocks above their 200day average is not yet at such extreme extremes because of the speed of this decline and broader gauges of downside momentum are getting stretched but have room to fall further the pain has been widespread enough that fewer than a quarter of index members are still within 20 of their 52week high as the chart from thrasher analytics shows this got worse in the covid crash – a fiveweek 35 collapse – as well as in the 20072009 financialcrisis bear market an 18month assault that took the market at one point to a 12year low a lot of the damageassessment studies look like this now showing the market unusually washed out by typical standards the kind of setup that is a clear buy in an uptrending market but is less reliable in aggressive downtrends like in 20002002 and 200809 multiyear retreats coinciding with sharp recessions and featuring successive waves of corporate distress buying opportunity near as share prices fall forward potential returns by definition go up which promises nothing about the timing or the path but big declines start to stack odds in a buyers favor market technician jonathan harrier  jonathanharrier on twitter points out that on thursday 42 of s  p 500 stocks hit a new 52week low only the tenth time since 1985 this total exceeded 40 in every one of the prior instances most of which were in 2008 and 2020 there was generally further downside an average of 76 over the next month for example yet forward returns were a good deal better than average in ensuing months yet last week might have been a shortterm crescendo of catalysts from friday the 10 th  the tape absorbed a toohot cpi report a leaked intention by the federal reserve to lift shortterm rates 075 percentage points rather than the expected 05 the eventual threequarterpoint hike and hawkish talk from chair jerome powell all leading to one of the heaviest quarterly options and futures expirations ever seen on friday whats always been a narrow rocky path to a possible soft economic landing was almost universally cast as even more treacherous and unlikely after the fed essentially admitted it would have to soften up demand and employment quite a bit until inflation expectations mostly a proxy for gasoline prices retreat convincingly yet if you squint could it be that it was also a shortterm peak in stagflation panic crude oil fell 10 and bigcap energy stocks dropped 17 on the week copper and agricultural commodities are rolling over and the twoyear treasury yield pulled back hard finishing below where it sat the moment before the headlines hit of the feds decision to do a supersized rate hike the market limps away from the week battlescarred and warweary yes but also more battletested and emerging with cleaner investor positioning morgan stanley says longshort hedge funds equity exposure last week hit the lowest level since april 2009 right after the system nearly imploded making these judgments is tricky and the week after june expiration – this coming week – has been consistently negative in recent decades down 25 of the last 32 years tough to know how relevant after a down58 expiration week last year june expiration week was down 19 and the following week the s  p gained 27 getting toward monthend should bring appreciable portfolio rebalancing back into equities after their massive underperformance against bonds this quarter and month are stocks cheap getting beyond the technical tea leaves and market rhythms and back to the question of whether lower prices mean good value heres where the s  p 500 forward priceearnings ratio is currently a pe a bit under 16 well off the precovid high and not far above where it has bottomed in prior severe selloffs in 2016 2018 and 2020 closer to 14times on a longterm basis this is essentially fair value rather than cheap various models incorporating interest rates and inflation might render it on the high end of fair so perhaps investors would be lucky if the damage halted around here as if a pendulum stopping partway through its swing many will say this evaluation depends on the reliability of the earnings forecasts which have largely held up and most see as likely to decline this makes intuitive sense but all the prior valuation lows also came at times when the profit picture was in serious doubt which is why valuations were collapsing in the first place in any case s  p earnings estimates outside of energy are already falling for the second through fourth quarters says barclays sliding 3 percentage points in recent months stocks resilience to further erosion here will be another test away from the marquee index things look a good deal cheaper the equalweight s  p 500 finished the week at 131times forward earnings it bottomed in december 2018 at 129 and in march 2020 at 11 smaller stocks are far more clearly getting cheap andor signaling a nasty profit plunge with the s  p small cap 600 scraping 10times earnings a few blips above the march 2020 trough selected blue chips are certainly starting to emerge in valuation screens too jpmorgan chase  not far above 9times expected profits is almost down to the pe it reached as ceo jamie dimon bought shares in february 2016 to help put in a low for a brutal multimonth correction best buy under an 8 pe and with a 5 dividend yield seems to be discounting scary things for the consumer maybe this is justified given the way consumers overdid it with durable goods since 2020 and a dicey retail future value traps after all are a genuine hazard of buying cheap but for anyone thinking the economy can be more resilient than now feared the bargain bins are starting to fill up