HOW
HIGH WILL THE STOCK MARKET GO?
Yesterday’s
blog is an important one for those who want to have an idea of where the
markets may go from here. The chart
showed that when the Confidence Index (the percent of investors who are
confident there won’t be a crash in the next 6-months) reaches a low of about
20%, the markets are registering a low or are very near their lows. This is just another piece of evidence to
support my thesis that the S&P 500 low of 1099 that we saw on 3 October
2011 was a significant low and should allow us to see further gains off that
low (see posts of 3 January 2012 and 3 Nov 2011).
To
save you the trouble, I suggested on 3 Nov 2011 that the 1099 looked like a
bear market bottom. I then wrote, “Historically,
the smallest increase in the next Bull phase following a bear cycle was 29% in
1911-1912. That would carry us to about
1420. The shortest bull-cycle was
7-months in 1938…
The
average Bull-return has been102%, lasting on average, 26-months. That would carry us above 2200…Time for
another famous stock market quote: “No.
No. That's not true. That's impossible!” To which I reply, “Search your feelings; the
high won’t be above 1550.”
Star
Wars aside, the S&P 500 is up 20% since the 1099 bottom. I still think the 1550 is as high as the
markets will go before a reversal since that is the current Bear market top,
but we’ll see.
Now
let’s look at the 1099 value one more time.
It is ½-way between the 1560 top and the 666 intra-day bottom (more or
less). That 50% point (1/2-way between
the high and low) is often a key reversal point so there are good technical
reasons the market is heading up now. If
you look at the “Compare the 1966 Bear Market to the Current Bear Market” (link
on the right), the analogous time frame is 1977 on the Dow (top) graph where
the Dow made a low at the 50% point between the high and low. From there it went on to make the old high
for roughly a 33% gain.
From
the present S&P 500 value of 1324, 1560 is roughly 20% higher so I am
suggesting that we could go 20% higher – I think that is very doable, though we
may see a correction in the range of 10% (just a wild guess) before we get
there.
NTSM
SYSTEM UPDATE
NTSM
analysis remains BUY today, but it may slip to hold tomorrow depending on
investor sentiment; the NTSM Sentiment indicator looks like it may switch to
sell. (That won’t tip the NTSM overall rating to sell, but it means I’ll need
to be more on-guard.)
I
bought back into the stock market at S&P 500, 1155 on 7 Oct after the 6 Oct
NTSM buy signal. I remain 100% long in
the long term portfolio (100% stocks in the 401k.). (See the page “How to Use
the NTSM System” – the link is on the right side of this page).
