Friday, October 31, 2014

That was fast

The stock market correction that started on September 19th reached its nadir on October 15th with a dip of 7.4%.  As of today (October 31) the correction is already over, and the S&P 500 index has reached a new all-time high of 2018.  I predicted in my previous post that the market was destined to continue rallying in the next few weeks, but I didn't think it would resume this quickly.

Short-term investor emotion is still pessimistic (which is a bullish indicator), internals are still bullish, and the seasonal cycle is at its peak bullishness.  Thus, despite our serious economic problems, the objective technical forecast for the stock market is UP.

In other news, the price of gold has reached a 4-year low, which is what one would expect in a deflationary scenario, rather than the inflationary situation that we've been in thanks to the counterfeit money printing quantitative easing by the Federal Reserve Bank.  This counter-intuitive behavior is yet another example of why I try not to make forecasts based on economic fundamentals.

Monday, October 13, 2014

A real correction at last

"Real" stock market corrections - declines of 5% to 20% within a rally - have been rare lately.  When the S&P 500 index closed at 1906 on Friday, it marked a 5.2% drop from the all-time high mark of 2011 reached on September 18th.  The last two corrections before that were in February of this year and June of last year, and both of them bottomed-out at around 5.5% below the previous highs, meaning they barely qualified as corrections.  We're overdue for a bigger correction of 10% or more.


The place-holding version-1 marketbots are now pegged optimistically at an internal price forces number of 10 out of 10.  This is due to a dependable multi-year seasonal factor that tends to trump almost every other indicator.  Even so, the other internals that the marketbots are now ignoring are still mostly bullish, and there's no sign of a pending crash signal, so the long-term prognosis for the market is now about as favorable as it can be from a technical perspective.  Of course, if World War 3 breaks out tomorrow then all bets are off - some events can't be predicted by market data.

Yes, the S&P may continue to fall for the next couple of weeks and complete a more significant correction, but objective seasonal factors and internals favor a continued rally in the long term.