Forecast S&P 500
Updated
Here is my forecast based on Fibonacci, moon cycles, and Elliott. My thinking should be fairly obvious for anyone who understands the methods. If you have a question please let me know
I have not taken fundamentals actively into account, but it is interesting to ponder the following:
(1) The trade sanctions can come into effect March 1.
(2) FOMC take place Jan 20, Feb 20, and April 1. A rate hike might happen Feb 20 (or April 1). This will be negative. However, no rate hike might be even more negative because that would signal that the economy is not as strong as believed. Furthermore, miscommunication by Powell could scare the market.
(3) The 10-year treasury yield is down from 3.2% to 2.8%. Lacking further data I would assume that the trend will continue down. I don't think the Fed will meddle any more with long-term interest rates. There can easily be an inversion of the yield curve, even if the Fed does not increase the short term borrowing rate. An inversion would be very strong evidence of a recession in 2020. However, when the inversion happens, the market will already have taken the recession into account. If the trend in treasury yield reverses, the stock market will be boosted. However, I do not expect this to happen.
(4) Trump might also create his own volatility (e.g. leaving Syria, impeachment, the border wall) which would increase price volatility and drive prices down.
It is best to consider the next month a forecast and the subsequent months a roadmap that can change depending on what happens during the first month. The time dimension is tricky. The moon cycle has been extremely accurate the last year and I assume it will continue. However, declining markets can drag. So it is very possible that some of the patterns get dragged out another moon cycle or two.
I have not taken fundamentals actively into account, but it is interesting to ponder the following:
(1) The trade sanctions can come into effect March 1.
(2) FOMC take place Jan 20, Feb 20, and April 1. A rate hike might happen Feb 20 (or April 1). This will be negative. However, no rate hike might be even more negative because that would signal that the economy is not as strong as believed. Furthermore, miscommunication by Powell could scare the market.
(3) The 10-year treasury yield is down from 3.2% to 2.8%. Lacking further data I would assume that the trend will continue down. I don't think the Fed will meddle any more with long-term interest rates. There can easily be an inversion of the yield curve, even if the Fed does not increase the short term borrowing rate. An inversion would be very strong evidence of a recession in 2020. However, when the inversion happens, the market will already have taken the recession into account. If the trend in treasury yield reverses, the stock market will be boosted. However, I do not expect this to happen.
(4) Trump might also create his own volatility (e.g. leaving Syria, impeachment, the border wall) which would increase price volatility and drive prices down.
It is best to consider the next month a forecast and the subsequent months a roadmap that can change depending on what happens during the first month. The time dimension is tricky. The moon cycle has been extremely accurate the last year and I assume it will continue. However, declining markets can drag. So it is very possible that some of the patterns get dragged out another moon cycle or two.
Note
Market is progressing according to plan. Has now reached 50% retracements. Ideally a few days left in the cycle, so we might see a 62% retracementNote
Market is progressing. Might reach the 62% retracement, but it is getting late in the cycle. Bad news might come from the core inflation data on Friday. Also the Brexit vote in the UK parliament early next week.When the downturn happens there is no guarantee that the intended target is reached. All we can say is that the market will go down, Very possible that we stop at the recent low, or go all the way down as indicated in the chart. Actually, even further down is possible, but no need to make low probability forecasts at this point in time
Note
Small wave (4) is getting longer, and I would redraw it as peaking 6-7 trading days from now. Then small wave (5) would take us down. Then big wave (A) would start, with small wave (A)In English: Flat or slightly up for another 6-7 trading days. Then a sharp fall on some bad news. Followed by a rally when Trump signs some kind of deal with China
Note
Addition: Clearly I missed the strength of the market and how the moon cycle just faded away due to the strength
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