2017 FORECAST S&P500 INDEX DAILY, by Tim West

2017 FORECAST - S&P500 INDEX - Daily

Here we are again: January of a new year. The election is behind us. And the recount is behind us too. So many bombs dropped over the last year, both real bombs and word-bombs by Presidential candidates. The word-bombs seem to get all of the attention with Trump winning the "best word bomber" last year by Time Magazine as the "most noteworthy" person in the world. Now with that out of the way, once again we have the same variables facing the market: plenty of headwinds and tailwinds. See 2016 list, to your left in blue.

I like to start with an understanding of what "expectations are out there" and I do that with the Wall Street consensus for the Year-End S&P500. I added that with the RED BOX at the top which is around the 2300-2400 range. There are some above and below that range, but that gets 90% of the estimates.

The 2085 level was the launching point of this latest advance from before the election and that level was retested in the hours after the election results indicated Trump the winner. The market action up until that point, together with the lowest-ever-50-week readings of AAII Investor Sentiment Readings indicated to me that we had COMPLETED a bear market at this point in time. I view a bull market as 20%+ so a move to $2500 in the S&P would accomplish this technical feat. With plenty of skepticism, fears aplenty, high cash, massive retail selling of equities and mutual funds, high short positions, and "no bear market in prices" suggests very strongly that a 20% rally from 2085 is likely, and possible.

What I foresee happening in the first half of the year is the time window for Trump to get the most on the table for pro-growth, tax-cut, red-tape-cutting, Obama-care bashing, "Make America Great Again" pushes for change in the House and Senate. I hope we see Reagan-like Investment Tax Credits, Cuts in capital gains tax rates for young and small investors to get investment capital moving and to get banks lending again.

The second half of the year, especially towards the end of the year, I foresee a correction in prices back to the start of the year on signs that there is friction in the Republican Party and fears to make bold and broad changes to the tax laws and concerns about the credit rating and borrowing capacity of the US. The Democrats will be stalling with threats to shut down the Gov't and doing everything in their power to stop the changes Trump is pushing through.

Tim West January 12, 2017 10:54PM EST

I made this chart over a week ago and decided to keep ALL OF THE TEXT on the graph from past year's to show you that I didn't change anything. You can review the previous year's graphs from the links below for 2016, 2015, 2014, 2013. I must say the pressure is much higher after I have done four years in a row that are very close to what has happened. I think, in hindsight now, that it was easier because we had a 2nd term President who didn't change much in his view of the markets, economics, or philosophy. Whatever does happen, I wish you peace and harmony as you make your investment decisions throughout the year. Imagine different scenarios in advance and decide what you will do, in advance, so you can be better prepared when change does happen. Stay in touch throughout the year by clicking "follow" on this chart to get important updates. In the past two years I was able to catch the major bottoms and tops throughout the year.

Комментарий:

I do need to update the headwinds and tailwinds for the market. I also recommend that you follow Liz Ann Sonders @lizannsonders at Twitter since she has been bullish and posts bullish rationale for the market. Also, Jeffrey Kleintop @JeffreyKleintop is also at Charles Schwab and posts very solid, logical charts unlike the doom&gloomers that seem to be everywhere that I go. It is so easy to be negative because the stock market has had two major wipe-outs in the last 15 years. So to the average person, it is easy to think these happen very frequently, but they don't. It takes a LOT of change to have a 50% drop in equity prices in a short period of time. And the bubble-valuations of the year 2000 with the internet craze and the 2007 real estate bubble popping are quite rare events, each normally would require 20+ years to create and pop, but these two gems happened within just one 20 year time window. The result of two giant bear markets is a fear-based mentality where investors are always looking for the next bear market. Fears of a bear market mean you hold too much cash, hold too little aggressive growth investments, and basically hide from taking much risk. (More to follow...)

Комментарий:

As of March 29, 2017, the market is tracking along almost as forecast. Another 10% push up should do the trick to get the many "vocal bears" to give up or to at least give them far more pain. It should also do the trick of bringing in much more of the money on the sidelines into the market which had bailed out across the years of 2015-2016. The bear market of 2015-2016, psychologically, tore at the heart and soul of America with the end of it being the election of Donald Trump. We haven't had a bull market from the election yet, but I believe that a bull market from the point of the election would be just what would create an opportunity to sell off long positions and rest in cash while the market runs out of buyers at that level. Bears point to valuations being extreme, but they are not relative to central bank interest rates. Bears point to high margin levels, but a major part of that is people selling short and margin debt doesn't lead or give signals to what will happen in the market. It's a rear-view mirror indicator. On the plus side, crude oil prices are relative low (not over $100 barrel) and corporate earnings are rising and profit margins have stayed strong with share buybacks and rising dividends continuing to support stock prices. If you believe in finding great values, there are many groups with PE's of under 12 and many other where the PE's are over 30. This is a split market with very cheap stocks and very expensive ones. It is NOT a one-way market. Do your own "bottoms up" analysis and know what you own and sleep well at night.

Комментарий:

2000-2009 was a loss of 65%
Same 9-years, same % (+/-)
If you go back further to the 1970 peak, I think it was even higher, but either way.
At least TradingView goes back to 1971 now.
We broke out in 1992-1993 and went on a 10-year run
Of course! We had the internet just kicking in back then.
We had a Peace dividend too.
We had post-middle east tensions (post Kuwait).
Inflation was dropping considerably and productive investment was easy, AND the tax laws were huge on getting real estate investing (speculation) going with massive leverage from banks and low-down-payment mortgages.
AND MOST IMPORTANTLY, we had baby boomers with little babies and lots of them, spending money on bigger houses and bigger cars.
Now we just want electric cars, cooler gadgets, faster computers, more gadgets for tracking our things, more software, and smaller houses... so the economic drive isn't there this time. There's 20% down payment mortgages only. 5% down if FHA sponsored, low house price.
So this rally is all about efficiency of energy and driving costs down, not about expanding the pie. People will lose jobs, but companies will earn more. Those who don't have cash will have to sell their investments, driving them out of stocks while earnings are still going up, up, up.
That's what is so frustrating for everyone to comment on. Wages are stagnant. Jobs are stagnant. Yet, company earnings keep rising.
Interest rates stay low.
Inflation is low because of all of this technology, software, chips, applications, competition, global trade.
The Gov't tries to spend to keep the system afloat, but it just sinks further into debt.
////////
Some comments from the Key Hidden Levels Chat Room
June 21, 2017 11:27AM EST

Комментарий:

UPDATE: My forecast for a 20% bull market was achieved by the DJIA so far from the low, but not a single person has called this the "New Trump Bull Market". It's the only bull market that doesn't have an identity of a bull market, from what I can tell. The important point is that the action we had going into the election was in itself a bear market psychologically on my RgMov indicator, which has nailed every bear market since the 1980's and I've watched it in real time each time. Before 1988, I can't say because I wasn't watching it in real time yet.

"The 2085 level was the launching point of this latest advance from before the election and that level was retested in the hours after the election results indicated Trump the winner. The market action up until that point, together with the lowest-ever-50-week readings of AAII Investor Sentiment Readings indicated to me that we had COMPLETED a bear market at this point in time. I view a bull market as 20%+ so a move to $2500 in the S&P 0.70% would accomplish this technical feat. With plenty of skepticism, fears aplenty, high cash, massive retail selling of equities and mutual funds, high short positions, and "no bear market in prices" suggests very strongly that a 20% rally from 2085 is likely, and possible."

Комментарий:

Review my January 19th comment: It has a lot of value. Read from below.

"timwest PRO 2use Jan 19
@2use, I am finding values all across half of the big board, meaning that half the stocks are cheap and half the stock seem expensive to me. The market overall might be expensive, but that is because profit margins are so high historically and have sustained at high levels for many years. Yes, debt has gone up, as it should due to low rates. Certainly, thank God, investment returns are higher than the cost of money. Imagine if that weren't true, we'd be doomed. It's easy to borrow a few trillion in each country and invest that money to generate real world returns that are far in excess of borrowing costs. Being a bit ridiculous here, but if you borrowed to put in a solar panel system in your home, you could earn 12%-18% return each year in the form of utility savings, which would more than pay the 3%-5% borrowing costs. If you have savings in the bank earning 0% (like every bank here in the US), then the cost of putting in solar panels is really a great investment. What's my point? We have plenty of bears, plenty of cash, plenty of shorts, plenty of margin longs too. Anything is possible. I would think we will turn back from the goal zone of 2300-2400 quite a few times, then shoot past it briefly as we collectively heave a sigh of relief, then we look for a meaningful correction. I re-viewed my "Post 1991" market correlation and we could actually just grind sideways in a very tight 4% range for the entire year here too. I might move to that kind of thinking and play shorter term overbought and oversold candidates. Look back to my older posts from within the last year and find where we had the 1987-crash to the 1991 expanding triangle led to a tight 1992, tight 1993, tight 1994. I think we could do the same here, starting now."

We've had LOW VOLATILITY, which is similar to "TIGHT RANGE" as in 1992-1993-1994.

Low volatility doesn't predict anything going forward. With a well-known analyst/manager using volatility as a reason to take a trade in options and predict a market melt-down to make money from being long put options, you can REST ASSURED that the odds are 50/50 or "no better than any other day" that the volatility will rise from current levels. We can get rising prices and rising volatility going forward. Please review my other charts on this important matter. Remember: Low volatility predicts nothing. August 9, 2017 11:34PM EST

Комментарий:

If we get to a new high in the S&P, I think there is a case that would be enough "euphoria" to put in a decent top, especially after Jeff Gundlach has been actively calling for a market meltdown and all of the focus on "low VIX" as a reason. If you follow my publications and see how I use VIX properly, you will understand that the level of VIX has everything to do with the amount of liquidity in the market and if you look at it that way it will keep you balanced in your views.

Let me attempt an explanation: If VIX spikes, it means uncertainty but it also means the market is getting more illiquid as aggressive sellers meet buyers who run out of cash to deploy as prices fall, which is the conservative way to proceed in the market. Buy slowly on dips to make sure there isn't something that you are not aware of. The initiator of a trade is thought to be the aggressor and may have information that the other side of the market needs to respect. So when the market declines sharply, the natural reaction is to be patient and wait to find out the reasons "why" the sellers are being so aggressive, so liquidity dries up as prices fall especially in the face of some impending news. Liquidity is essential to understand and looking at VIX in the proper light will give you an edge since the world doesn't seem to understand what VIX is telling you. As a result of misunderstanding VIX, the environment in the market is so negative to the point where I don't think I've ever seen so much negativity in the face of high equity prices in my 33 years of watching the market closely. On top of VIX-based fear mongering, last year we had a long list of major investors trumpet loudly that the market was doomed to a sharp decline (George Soros, Peter Lynch, etc) due to valuation.

So back to "What I'm looking for":
In the past couple of years the "euphoria" that I was able to identify turned into decent tradable tops that the conservative investor could capture by moving funds into cash and re-deploying on corrections. I think that opportunity lays in wait for us at a new high and will see if I can catch the top.

Why euphoria? The news has been so negative and when a new high happens in the face of it, it makes for a feeling of invincibility. For example: North Korea threats to set off H-Bombs in the atmosphere over the US to shut down the electric grid sets a severely negative tone. Trump's inability to cut tax rates or pass any legislation to move his agenda forward makes the market frustrated. The latest impact of Hurricane Harvey and now Irma weighs heavily also and creates uncertainty.

Wishing you the best of success this year - and come visit me in the Key Hidden Levels Chat Room here at TradingView to find daily commentary and charts that will enlighten your day.

9:09AM Tuesday, September 11, 2017

Комментарий:

The continued "lack of euphoria" to mark the top of this rally is a bit surprising. Right now we sit and wait in the quiet period for 3Q earnings to come out starting in two weeks. The $VIX level has everyone terrified that the market isn't pricing in enough uncertainty, but recall that $VIX is a measure of "liquidity" and not "fear". Fear is best measured by the price of puts vs the price of calls. And by that measure, called $SKEW, people are "paying up for puts" and therefore is not showing signs that people are margin long, and nothing but 'stop loss orders below the market' like we had before every other market melt-down. So, just because the "media" highlights something doesn't mean it is true or accurate. Think through it for yourself. Realize that everyone is selling something to someone when they speak or write an article for the paper or the internet. I'll keep looking for euphoria to mark the top of this market.

The one very interesting parallel is 1987 when Greenspan took over as the new Fed Chair - it was right at the high and Greenspan hiked and trash-talked the market that summer before the crash in October 1987. So, let's see who makes it into the new position and see if there is a parallel to then, now just 30 years ago.

Friday 9:23AM EST October 6, 2017

Комментарий:

"Lack of Euphoria" - There is more doubt and not much "fear of missing out" despite the significant rally from the election of President Trump nearly a year ago. The readings of $SKEW continue to show plenty of fear while most look at low readings of $VIX to point out that people are bearish. I will reiterate my point I have made over and over again: The fact that $VIX is low means that people are "selling options" and the fact that $SKEW is high means that people are buying puts. So that leaves us with one VERY LOGICAL conclusion: People are selling calls (showing that they are bearish) and buying puts (showing that they are bearish). As the market lifts, the "call sellers" buy back their calls and re-sell calls at a higher level so they don't lose their position. Alternatively, they sell their position and HOPE for a correction to buy back their shares sold (likely at lower levels).

This is how markets work: Markets exist to serve the most people possible and trade to the level where the most volume will trade. If the market has too much cash on the sidelines and willing buyers are waiting for a drop in price to get in, then the market will not provide that opportunity because there aren't sellers to provide that liquidity. This may sounds like mumbo-jumbo, but walk yourself through the logic of any situation you have faced and see that it makes sense.

I can imagine a scenario where the money sitting on the sidelines comes into the market on a cut in the US corporate tax rate and THEN the market can go down as we can presume that people will move into stocks aggressively on that news. Once they have bought, who is left to buy... and you get the opposite.

The rise in crude oil could put a damper on further upside in the market, but the fall in the $DXY (US Dollar) is having a very positive impact on the stock market's 'earnings' since more than half of the earnings of the S&P500 come from non-Dollar. I'd make a quick assumption that the $DXY's 10% drop will add a nice boost to earnings looking forward, which is supporting prices. When the $DXY was moving up dramatically in years past, I pointed out that and concluded it was a headwind and a challenge for higher stock prices.

All in all - we are heading into earnings season and today was 10% of the DJIA stocks with $GS, $UNH and $IBM after the close. I would expect $GS will be removed from the DJIA (I hope it is and I enjoy guessing which stocks will be removed - I would add a different financial company instead of $GS).

See you in the "KEY HIDDEN LEVELS CHAT ROOM" - where I spent 99% of my time here at TradingView and publish many charts during the day with specific entry and exit levels. It's almost as if you are receiving the equivalent of a signal-service for free, just for being a user here at TradingView.

Cheers -

Tim 2:02PM EST 10/17/2017

Комментарий:

There are plenty of points to make since my last post on October 17th:

1. $SKEW has fallen off - revealing a loss of fear.
2. Interest rates in the short term have edged higher. Always a problem.
3. Crude Oil has moved up 10% in the last month. This puts a major cap on stock prices going out 3-6 months and is a major negative here preventing upside progress.
4. Earnings season was disappointing (is disappointing) and there is a clear lack of upside progress without financial engineering (buying back shares to get earnings up).
5. The movement of the Trump Tax Strategy has some anti-leverage components to limit deductibility of interest which is quite surprising given that Trump has created his wealth on massive leverage and FULL deductibility. This is ridiculous and what happened prior to the 1987 stock market crash 2700 to 1700 in 2 months (over 40% and would have been more had the market stayed open, futures were trading down another 20% for a full 60% decline in 2 months).
6. Movements to close the pension gaps around the country could impose a massive tax on all of us, which diverts funds away from enterprise and towards Gov't, which is bad for all of us long term.
7. (((( I have more points, but I'll post this and come back shortly and post more))))

Tim 9:01AM November 9, 2017

Комментарий:

Reading through my old market commentary after I saw on Bloomberg's headline that stated that "NO ONE PREDICTED A BULL MARKET". So I googled to find this forecast and found it right away.

Quoting this old commentary from 2017...
"
What I foresee happening in the first half of the year is the time window for Trump to get the most on the table for pro-growth, tax-cut, red-tape-cutting, Obama-care bashing, "Make America Great Again" pushes for change in the House and Senate. I hope we see Reagan-like Investment Tax Credits, Cuts in capital gains tax rates for young and small investors to get investment capital moving and to get banks lending again.

The second half of the year, especially towards the end of the year, I foresee a correction in prices back to the start of the year on signs that there is friction in the Republican Party and fears to make bold and broad changes to the tax laws and concerns about the credit rating and borrowing capacity of the US. The Democrats will be stalling with threats to shut down the Gov't and doing everything in their power to stop the changes Trump is pushing through."

-
Tim December 15, 2019