July 7, 2014 About two years ago evidence was presented that a major bull market may have commenced in 2009. Additionally, a statistical analysis of the historic data of the S&P Composite presented in an Aug-2012 article and Jan-2014 update thereto supported this finding. Since August 2012 the S&P500 has now gained a real 40% to the end of June 2014. So what further gains can we expect, if any?
Tagged with: 2020
Posted in 2020
August 20, 2012 In my recent articles I presented evidence in support of a possible major bull market which may have commenced in 2009. Here I show that another indicator, this time based on a statistical analysis of the historic data of the S&P, signals the same. But how high will the S&P go?
Nobody knows, and the best we can do is to use the historic data (which is from Shiller’s S&P series) to provide us with an estimate. From the real price of the S&P with dividends re-invested (S&P-real) one finds that the best fit line from January 1871 to July 2012 fits the data rather well when both are plotted on a semi-log scale. There is no reason to believe that this long-term trend of S&P-real will not continue into the future. S&P-real and the best fit line together with its prediction band is shown in figure 1.
August 14, 2012 In my article Get Ready for the Next Great Bull Market I showed that when the spread between the 50- and 200-month moving average of the S&P forms a trough, it identifies beginnings of major bull markets. Accordingly a new bull market should start at the end of this year. My further analysis, using an adjusted normalized price to earnings ratio, indicates that a major bull market has already started in 2009.
Most of us are familiar with the Shiller cyclically adjusted price to earnings ratio of the S&P. It is the real price of the S&P divided by the average of the real earnings over the preceding 10 years and is identified as P/E10 in Shiller’s S&P data series. The 10 year period seems to have been arbitrarily chosen so as to minimize the effects of business cycles. I am using P/E5 for my analysis, which is the real price of the S&P divided by the average of the real earnings over the preceding 5 years.
August 20,2012 In my article “The Ultimate Death Cross – False Harbinger of Doom” I showed that the spread between the 50-month moving average (MA) and the 200-month MA of the S&P will form a trough before the end of this year, irrespective of the level of the S&P over the next few months. This event provides a positive outlook for the stock market and could herald a new bull market to 2025.
Most of us are not familiar with Terrence Laundry’s T-Theory, which is a method of analyzing general investment trends using a time symmetry property. It basically states that the duration over which investors can obtain “superior equity returns” will always be equal to the previous time period in which returns were subnormal. The practical purpose of the theory is to anticipate the runs of “superior returns”.
July 24, 2012 Foreword from dshort: In this commentary, Georg Vrba focuses on a less commonly appreciated aspect of moving average signals. We normally focus on the point of crossover, which is explicit in the signal terminology (e.g., Golden Cross, Death Cross). But Georg calls our attention to the peaks and troughs of the spread between the moving averages. The implications of this shift in focus are quite astonishing.
….. If history repeats itself we can look forward to good gains for the S&P starting late this year or early in 2013
July 24, 2012 Skeptics and devotees of technical analysis took notice last week when Albert Edwards, the closely followed investment strategist at Societe Generale, warned the S&P 500 was “on the verge of an ultimate death cross,” foretelling imminent major losses for the stock market. Edwards’ sense of doom is misguided. An ultimate death cross is mathematically impossible unless the S&P were to suffer an immediate and precipitous decline. Moreover, the signal would provide a positive outlook, if it were to occur.
The ultimate death cross is when the 50-month moving average (MA) of the S&P moves below the 200-month MA. The difference between these moving averages – the spread – must be less than zero for an ultimate death cross to occur. The spread will form a trough before the end of this year, irrespective of the level of the S&P over the next few months. This could be the harbinger of good news – a macro signal that the stagnation period since the year 2000 for the S&P is now finally over, and that a new secular bull market could commence.