timwest
Long

2016 FORECAST S&P500 INDEX - RATIONALE WITH HIGH 2112, LOW 1868

INDEX:SPX   S&P 500 Index
8742 85 127
10 months ago
I only have made 1 forecast for the entire year in each of the past 4 years. The market rarely does what the majority thinks it will. So I do my best to be sure that I am not in the majority. Last year I was neutral expecting choppy action when everyone else was very bullish . This year with many bears, therefore I do see another sideways year this year, but with a strong finish. Why? Read to the end.

Here are the very bullish factors supporting stock prices:
1. We have likely seen a massive wipeout of margin long positions here. I need new data to confirm.
2. We have blown up psychology with massive bearish psychology at hand. (This is very bullish )
3. We have a weakening dollar (this is bullish )
4. We have very low interest rates (this is bullish )
5. We have very low input costs ( oil             and labor, this is bullish )
6. We have a massive melt-down in biotech happening (this is bullish )
7. We have a 25% corrections in place in the Nikkei and the DAX             (this is bullish )
8. Massive bearish sentiment by major brokerage firms for 2016. (Last year they were all bullish looking for an up-year of 10% on average and they were all wrong)
9. Terrible technical conditions (breadth, divergences, etc) - These work in contrary ways. Everyone sees them as negative. They are negative when people are selling to raise cash (which is bullish ).
10. Very high corporate profit margins (very bullish ).
11. Plenty of corporate cash on hand for mergers and acquisitions ( bullish )

So the foundation of the market is very very constructive from many perspectives.

The negatives are:
1. Rapidly rising default risk around the world as ZIRP and NIRP takes hold.
2. Falling PMI's signal softening economic activity
3. Corporate Buybacks can't continue forever, especially with rising default risk
4. Rising rates to corporate borrowers (Rising yields on HYG             , falling HYG             prices)
5. China: Weakening outlook. Drawdowns in reserves to support an overvalued currency. $99 billion drop announced today to the lowest levels since 2012.
6. Jobs numbers in the US have massive seasonal adjustments which are hiding the worst numbers we have had in many years.
7. Demographic challenges means that US Growth will stay low (and steady) for two more decades. Read Harry Dent's books.
8. China's demographics are where Japan's were in the late 1980's and very bearish long term.

Those are the main points that I have in my head at the moment that will see-saw prices back and forth across the range for the remainder of the year.

The reason for the strong finish to the year? The election will be out of the way. The election is having profound impact on psychology and the year-end will be a strong quarter, I do feel.

The low 1868 is for the balance of the year from now, Sunday February 8, 2016 1880 last SPX500            
9 months ago
Comment: 41 likes out of 1744 views as of Feb 10th at 3:30PM. This is my normal 2.5% or less "agree" rate.
9 months ago
Comment: Great rally out of the bottom end of the range. The 1812 low held from the "panic-1812" bottom forecast from last year. Overall, I think you can see that big rallies can occur from periods of very low optimism.
9 months ago
Comment: So far, we put in the bottom for the year despite all of the bad news, Presidential election disaster, Negative Interest Rates (which is really QE Infinity). The low at 1812 looks like it is far enough in the rear-view-mirror.
8 months ago
Comment: I think we are putting in the "RELIEF" rally high here. The rally happened faster than I labeled it out, but it looks like we have "HORROR" ahead of us. The reason for the rally? Well, how about the reason for the decline first.
1. Foreign currency trade unwinding from new regulations reducing leverage in currency trading forced traders to buy back their short-Yen positions and close out their corresponding trades that were financed with cheap and weakening Yen.
2. Crude oil - trying to find a bottom, and then bottoming/rebounding on short covering to the $40 level from $30-$26 at the low end.
3. Earnings forecasts dropping - led to a drop in valuations
4. Presidential elections - The extensive rhetoric the candidates throw around makes people nervous. As candidates drop out of the race, people are comforted. Overall, I believe America is very nervous about the current slate of candidates, which keeps a lid on the market this year overall.
5. M&A - China has already completed more M&A deals than all of last year, which was more than any other year. So, fears of China collapsing led to the decline and the rebound has been from people realizing the fears may be overblown.
6. Corporate buybacks - buyback are running stronger than at any time in the past. I did not foresee this in my previous comments. The fact that there are no projects or takeovers to complete tells me that valuations are "fair" for competitors and that there is ample credit available to corporations and there are no great investments to make in plant & equipment. This all speaks to a flat market for the year.
7. People who believe a weak January means a weak overall stock market may have sold out, but I sure hope very few people follow an investment strategy based on such ephemeral analysis.
8. Margin debt accounts may have waited until the New Year to sell positions to push capital gains into the following year, which is tactical. The level of Margin Debt is so closely correlated to the stock market index that it is truly a sign of investor confidence. However, it is not leading or lagging, but we get the data with a delay, so you have to be creative with this analysis.
9. The Fed: The December tightening forced investors to consider unloading shares and then by the time January-February came around, Japan went to Negative Interest Rate Policy (NIRP) to join Sweden's NIRP and the Fed said that negative rates could be considered a policy option in the future and all of the sudden we have an environment of Fed accommodation, which helped the market return to its previous price levels.
10. SO THERE you have it. I suggest you follow @LizAnnSonders at Twitter as she has the best fundamental data out there in beautiful graphs and common sense explanations. You'll really appreciate it if you check her out.
7 months ago
Comment: Nearing the "top end" of the forecasted range for 2016 where I put 2112 as the "Euphoria" level for year end, which would be AFTER Presidential elections. I don't see "Euphoria" here at all. This is a very strong relief rally, but there is not a lot of "belief" to go with it. There is a lot of doubt about Central Bank's ability to keep money cheap and deep concerns about levels of debt. Shorter term traders are heavily short the market here and investors are not committed to the long side here. We have a strong "wall of worry" to keep climbing and grinding higher. I will be on the lookout for how companies react to earnings reports this week (April 18th-April 22nd) to find any new information. Last quarter earnings of the DJIA components beat expectations (substantially lowered, of course) in 29 of 30 stocks. I would expect the same again this quarter. What we need to watch for is forecasts for revenues and comments by CEO's about margins. Remember though, keep an open mind. I believe there was very little faith in a market bottom earlier this year when I was outlining all of the reasons why we were bottoming. Now I see a lot of doubt about the rally as it reverses all of the losses from the 4th quarter. I look forward to your comments and questions and finding the right time to exit the long side of this market.
5 months ago
Comment: My comment below from "15 days ago"
"Ready to update given the swift lift in sentiment to multi-year high readings... a top is near. It looks as if we hit 'euphoria' on the likely nomination of Clinton for the Democratic Party. Earnings were lackluster for the latest reporting period and the US Dollar has slightly helpful year-over-year rates of change. I'll suggest writing 6-9 month AT THE MONEY CALL OPTIONS against any market positions. With VIX elevated to 17 from a recent 13, this could be a decent return as I assume a sideways market for the balance of the year. 2096 last SPX."
I hope you all took notice.
Tim
2 months ago
Comment: As for the GUESS for the DJIA's earnings PRE-EARNINGS season, it was for a total of $38.27 and it came in at $37.85. SO, that means earnings were revised down through the course of the earnings season and then the companies (27 of 29 so far) BEAT those lowered estimates (1 trailed, 1 tied). Which goes to show you that if you can't forecast correctly, forecast OFTEN! That way people ultimately forget what you forecasted. This is how the system works. The comments from 5 months and 3 months ago are still decent. The recent drop of 394 point (>2%) in the DJIA heading into the 15-year anniversary of 9/11's crash has everyone's nerves on end. And now the the Presidential race a total disaster, HIllary's health in question, Trump's sanity perennially in question, and lackluster earnings forecasts, war-mongering everywhere in the world from North Korea setting off an atomic bomb, and the eternal "China is imploding financially" calls, and it makes for feelings of "DESPAIR". It is quite interesting to have this level of negativity and despair when we are just a little bit off all time record highs. I'm still staying with the forecast for the year, which is sideways. I'll be in the "KEY HIDDEN LEVELS CHAT ROOM" if you need me.
a month ago
Comment: Extreme bearishness is rampant, especially from the AAII survey which is down to a 5-year low of 22% bullishness. This is nothing short of remarkable, but it is understandable given the vile attacks going on between the Presidential candidates and the lack of sound judgement from either one of them (especially the 4-minute delay to launch our nuclear response), the lackluster earnings forecasts, the withering economic activity (as we watch the unhappy future for the United States from either one of these candidates), rising crude oil prices, Russian aggression, attacks on humanity (even crazy clowns, and police shootings), and the extremely biased news reporting by the media (covering the ultra-sad state of affairs in the US). The ultra-bearish comments by billionaires over the course of the past few months has us all still nervous and the constant "chicken little" calls about China collapse weigh on our collective consciousness. Brexit fears still are high and Draghi's ECB actions are never enough. The banking system in Europe is still highly leveraged and losses haven't been recognized yet. How do we stay positive amidst all of this negative news? Well, by understanding that people are already on the sidelines sitting in cash waiting for prices to fall. In reality, we need to have sellers to drive prices down. So, there may not be a reason to buy, but the reasons to sell are behind us.

So, what are we to do? Calmly, patiently watch the next 15 days as the companies report earnings and forecasts for the next quarter. Expect guidance down as things have softened in the past few weeks.
24 days ago
Comment: I think we may have seen "DESPAIR" last night as the election results rolled in and the S&P futures were lock limit down at -5%. The USDMXN had surged to near 21, up nearly 10% from 18.5 that day. Crude oil was down $2 to $43 as bears piled on to get the market to break support levels to trip more sell orders. Sentiment is about as bleak as I've seen it in many decades and with the stock market "appearing" to be rolling over to most people and with earnings softening. The market looks further out than one quarter, but we need perspective and time will provide that for us. For now, I'm sticking with "muddling along" sideways. Stocks may look like they have a long way to fall, but it doesn't mean they have to. The market is awash in cash (that's the bubble, by the way, cash holdings) and also in short positions which will support the market on any declines. Keep your head firmly on your shoulders and look at the values you can find in the market: Airlines, Automotives, for example, have strong earnings and cash flow yields.

See you in the "Key Hidden Levels Chat Room".

Tim Nov 9, 2016 7:31AM EST
14 days ago
Comment: My 7:31AM on Nov 9th comments saying the market is at a bottom are hopefully worthy on note and attention. The market had come off of "lock limit down" so In hindsight you might say "Well, it was obvious" but I think you can consider sharing the link to this page to your friends and acquaintances who could use a wise word or two from time to time. Encourage them to "follow" me here at TradingView and to navigate these markets week by week (not minute by minute). I don't overwhelm you with endless trading ideas and non-sense. Instead, I show you the big picture and give you reasonable logic by which to make a decision, using a combination of market sentiment and fundamental valuation to back up my point of view. I look forward to hearing from you and hope you can spread the word about TradingView and "those annual forecasts from Tim West". November 19, 2016 5:40PM EST
Subscribe to my indicator package KEY HIDDEN LEVELS $20/mo or a discount for a year and join in the trading room KEY HIDDEN LEVELS here at TradingView.com
jhakas
10 months ago
very nice and in detail..

snapshot
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timwest PRO jhakas
10 months ago
No offense, but please don't post a 60minute chart when I am forecasting for a YEAR! Please.
+6 Reply
jhakas timwest
10 months ago
Gotcha! here is monthly

SPX500 Analysis as Per Monthly Chart..!!!
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timwest PRO jhakas
10 months ago
Do you have any comments on the major drivers and factors? ( In the past we used to have a "disagree" button, which is what you are saying with your chart post because you see trends out of this range and I see a continuation of the sideways chop. Can you defend your reasoning or rationale? I see a major battle between bullish and bearish factors. It took me an hour to outline my thinking. )
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jhakas timwest
10 months ago
as being your follower i heartily respect everything you post.. and I am in no way disagreeing..!! Everything you share is worth reading.. and sorry if i have offended you. regarding drivers and factors... yes i am bullish but i also expect this year to be little problematic for stocks due to global turmoil and China.. and good example is start of year.. i follow seasonal trends so this year is different from past years.. but above all I am still learning :) thats why i am following experienced traders.
+3 Reply
2use timwest
9 months ago
Hahah, that was funny :D
+1 Reply
moorekapital PRO
10 months ago
Alas! Glad to see this. Thanks Tim, for every pain.
+2 Reply
jonasopdahl
9 months ago
Thanks for sharing, Tim. Great analysis!
+1 Reply
Victor.Y.F
9 months ago
Thank you Tim! Same view with you. I think we are testing 200 weeks SMA 1762 soon and a nice buy there. It's surprising me that so many people are turning to bears so quickly but for me the monthly 5th. Wave is pretty sure. I see the market but not "believe" That's a big difference.
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Tim, what is your view on equity fair value vs pre/post QE? In my opinion it is impossible to determine and I am looking for '00 '08 highs short to mid term; but would like to know your thoughts.
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timwest PRO smitheric1970
9 months ago
Good question: I think fair value is determined by alternatives, like corporate bonds, which are often better than stocks since they have first claim on assets in a liquidation and do well in low inflation environments (and deflation). Look at what investment grade returns are for High Yield bonds and you will have your fair PE for the stock market.
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smitheric1970 PRO timwest
9 months ago
Great answer, much appreciated Tim.
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2use
9 months ago
"41 likes out of 1744 views as of Feb 10th at 3:30PM" people are just stingy for likes as always
+1 Reply
mazer_rackham
9 months ago
Here are the very bullish factors supporting stock prices:
1. We have likely seen a massive wipeout of margin long positions here. I need new data to confirm.
Good point. I didn't think about that...

2. We have blown up psychology with massive bearish psychology at hand. (This is very bullish )
Yes perhaps, but I'm a broker and I see people start to come sell now, and that is typically a sign that the tide is turning to bearish, I'm still thinking there needs to be a bear market for about six more months before markets can enter a new bull. Your later point about the election would serve as a good catalyst, so make it 9 months...

3. We have a weakening dollar (this is bullish )
Interesting you see it this way, I see the dollar getting stronger, this recent pattern seems to be more consolidation for a continued rise given the US is leading the world in the tightness of their policies. With Japan and Europe loose and the US staying pat or tightening this gives us a relative tightening effect, no? IBD has a huge headline in last nights paper saying the strong dollar having an effect on earnings...

4. We have very low interest rates (this is bullish )
Agreed. They got weaker, and seem to continue to even as the Fed tried to tighten... bullish or bearish? Typically bullish yes, but isn't this a bit concerning that even when they tighten, the rates still drop?

5. We have very low input costs (oil and labor, this is bullish )
Agreed, but the effects this brings are to profit margins more than revenue gains, guidance has been poor from many companies on 2016 revenue targets.

6. We have a massive melt-down in biotech happening (this is bullish)
Not sure how this is bullish...

7. We have a 25% corrections in place in the Nikkei and the DAX1.17% (this is bullish )
How so? I am not trying to argue, just to understand the reasoning behind why a selloff in what have been stronger economies markets is bullish for us...

8. Massive bearish sentiment by major brokerage firms for 2016. (Last year they were all bullish looking for an up-year of 10% on average and they were all wrong)
Yes, to me it seems they are trying to bring down the markets. I believe they have put shorts in place over the last 6 months as the volatility escaped the index it was from liquidations on limit sell orders essentially slowly exiting and distributing their shares so they could time harder shorts with the first rise in rates from the Fed. China helped them out with a few news events as well.

9. Terrible technical conditions (breadth, divergences, etc) - These work in contrary ways. Everyone sees them as negative. They are negative when people are selling to raise cash (which is bullish ).
Why is selling to raise cash bullish?

10. Very high corporate profit margins (very bullish ).
Yes, this is definitely bullish. The valuations are very nice on a lot of companies now too, I look at the fundamentals and have made long purchases, but they are getting rocked and if we see that break of the 1850 or 1800 level I think we will have a nice finish to the bear market with that drop. However, there is some talk of Euro banks in big trouble, and now if this news hits us, its definitely going to be a worse crash than 2008.

11. Plenty of corporate cash on hand for mergers and acquisitions ( bullish )
Yes, this is true, but wouldn't this be more bullish if instead of merging we were buying machines and adding jobs to GROW the economy instead of moving assets from one place to another? This M&A activity to produce earnings growth typically happens more at the end of bull markets.

So the foundation of the market is very very constructive from many perspectives.

The negatives are:
1. Rapidly rising default risk around the world as ZIRP and NIRP takes hold.
To me, this is still something people don't think can happen, so this is the place to bet, take a small option on euro banks failing and it might pay off big, meanwhile the US index will continue to move down or sideways...

2. Falling PMI's signal softening economic activity
Why is there softening activity if the input prices are lower? Why is demand lower? This doesn't make sense to me...

3. Corporate Buybacks can't continue forever, especially with rising default risk
Ok, true, but they can definitely go for much longer than usual because of all that cash, you just said that...

4. Rising rates to corporate borrowers (Rising yields on HYG-0.14% , falling HYG-0.14% prices)
Rates have been a surprise. I work at a LARGE us bank, and we've been on a hiring freeze for 6 months, and now I'm hearing of some layoffs coming...

5. China: Weakening outlook. Drawdowns in reserves to support an overvalued currency. $99 billion drop announced today to the lowest levels since 2012.
Currency wars... still would love to talk through how this is logically to play out... if we do this and Japan does that, then what does that mean? Would love to read your thoughts on the Game Theory of Currency Wars...

6. Jobs numbers in the US have massive seasonal adjustments which are hiding the worst numbers we have had in many years.
I'm unaware of how bad this is... I don't see why job growth wont get going... is it Obamacare? Is it a strong dollar so want to hire abroad? Is it the election coming? If Sanders is elected president, I think we will see the stocks crash just on that alone, and I'm not kidding.

7. Demographic challenges means that US Growth will stay low (and steady) for two more decades. Read Harry Dent's books.
Hmmm... interesting. I'll have to check that out.

8. China's demographics are where Japan's were in the late 1980's and very bearish long term.
Interesting as well. Very long term trend, but interesting none the less.

I hope you don't take offense to my comments. I write them only to read your replies, because I'd like to know how my own thinking may be incorrect. This is an AWESOME post, and you could really make an article about each point on your list supporting it with evidence and it would make quite a read. I'd definitely read every word. Reading your post made me much more bullish, I was one of those bulls that has turned bearish I'm afraid to say. But I don't feel right about bailing on my positions because it seems the challenges are minor compared to the health of the firms fundamentals. I think all this could very well blow over. But when I look at past market tops and how we have consolidated to the right side of the trend line, and have failed to achieve higher highs and it's been a 7 year run, it seems due to really correct now. It just looks ripe to plunge... just does I don't know. I was surprised it didn't today to be honest. It has been a long time coming too with all the slow movement the 2nd half of the year. Maybe that makes me a bad investor, because I could be being weak, and I could be wrong, I frequently am, but it's just my view... markets don't need a reason to sell off other than people want to take profits.


Thanks for the clear numbered list and organized thoughts,
Mazer Rackham
+3 Reply
timwest PRO mazer_rackham
9 months ago
I read your reply yesterday Mazer - Thank you very much for your comments.

I didn't have an hour to reply to you yesterday but my instant replies are the following:
1. It is bullish when markets around the world are in a bear market because that means they have already gone down by dramatic amounts (20% or more, many 25% or more). That contagion selling has already had an impact on selling here. If you see companion selling in the DXY when foreign markets are going down, it means foreign investors are liquidating their US investments, which from a contrary-perspective, is bullish. Some of the best market bottoms I saw through the 1990's were when foreign selling dominated. It tends to turn on a dime as value investors buy slowly and once the selling is done, they can ramp the prices back up swiftly.
2. What the conundrum is with corporate cash, as stock prices go down, corporations see that buying back stock isn't going to help much and keep the capital for business expanding deals and for dry gunpowder in case times get tough. Oddly, corporations are more retail-oriented in the last 10 years, buying stocks back when they are HIGH and selling shares when prices are LOW. So, the cash will be used for DEALS in my opinion and not for buybacks.
3. As for input prices lower versus economic softening, this is a somewhat reflexive process, but for the end-user consumer, lower input prices allows for higher consumption, higher savings, and higher investment. All of these things are bullish and the reason why retail spending is holding up better than people think. We are in a steady sideways pattern here from a demographic perspective and with low leverage at the consumer level and the banking level, we don't have the same risky profile that Europe has.
4. China is a fascinating twist to all of this market action - China's conversion to a consumption economy will take awhile, but they now have all of the infrastructure in place, they just need economic activity. Similar to the "build it and they will come" from the Kevin Costner movie. First you build the stadium and THEN you have the ball games and sell food, beer, popcorn, hats, tickets, etc. They have the stadiums, they just need some time to fill the ball parks. So, I'm not as bearish as everyone else in this regard.

I'm sure there will be more questions:

Thanks again for your questions and comments. Feb 12, 2016 12:46PM EST
+2 Reply
mazer_rackham timwest
9 months ago
1. I love this explanation to point 1. Excellent as my gut and perception of all the tickers I'm looking at tell me value stocks are already starting to rebound. It's been a hard year for some of these stocks I love such as GPRO, SWKS, and now even CMG and AAPL. These stocks I especially love because they are growth at value numbers and PEGs are looking tasty (ok GPRO had a bad earnings, but then the street gobbled it up... and what is up with TWTR? Up 11% today... I also saw GRPN have lift off yesterday, settlement and earnings, still a crap numbers but its so low it will probably follow through tomorrow. Do I smell acquisition in the air...? but I remember 2009, and I remember Jim Cramer wanting to pounce in Nov and Dec of 2008 and just complaining and whining how ridiculous the valuations were getting because he jumped too soon, so I don't think we are necessarily there yet. BUT... this foreign selling point is new idea to me, and I thank you for it because it was just a few days ago I saw the whole market tank and GPRO was holding up at 7% gain... hmmm.

2. Is there a way to track this? How would you look for M&A targets? Any fundamentals you look for?

3. If Citi, Deuche, Santander, and other euro banks come out with some kind of trouble is it not going to have contagion in the US Banking sector? Did not all the financials slide yesterday when these banks reported some kind of problems? I saw some guy on CNBC talking about a Euro bank crisis coming, he put out a bad bank list that included Citi, Deuche, and many others.

4.Interesting... So when would you change your mind from a neutral to a bear or a neutral to a bull? I would love a detailed answer on how an educated and EXPERIENCED trader systematically evaluates the market and adapts his views...

As an interesting follow up, how do you implement these ideas as well? Do you gradually just go more and more short the lower the market goes until you see something that makes you take some off and then some more off if the market comes up? Or do you have some other way of managing your short / long weighting? I have nothing short but my entire 401k went to cash on Nov 7 when the markets instead of rallying to new highs out of that chinese flash crash double bottom, sold off hard as soon as we got close. That was the day I pulled my money. Id like to get short the index and ride it down since I'm wanting to hold my stock positions in the value companies I own, but I'm not sure what entry would be the wisest. I think (and yet this is speculation and some research I did on 2007 market top) we will head to 2000ish level once more before it breaks lower. In 2007, there was one 1.0 fib retrace and TWO .61 fib retraces in the index before it hit crash day in 2008.

If my logic stands to reason, and it may not, since its different time now and different things going on, but it seems like the onset of the bear market in 2007 to me because I anticipate it going slowly downward for a while, until November elections to be honest. So, I think there will be chances to make money on both sides as you do, but I think it will remain a bear market more than bullish... depends on how much and steep we can correct though doesn't it? Anyway, how would you advise a newer trader to manage his money?
+1 Reply
mazer_rackham mazer_rackham
9 months ago
Oops it was Nov 12 not Nov 7 btw
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timwest PRO mazer_rackham
9 months ago
Thanks for all of your comments: I will see if I can address your concerns.
1. US Banks do not have the amount of leverage they had in 2007-2008 when they reached 33 times equity to 40 times equity. They are down to 10-11 times now and have significantly less exposure to energy. Investors are bearing the brunt of this investment loss cycle in energy. Time will tell and if the facts change I will do my best to change my opinion. In 2007 I was calling the top of the market cycle based on the repetition of the 1973 top which aligned on so many levels that I was forecasting a 50% drop in the market because of the deleveraging cycle that was coming. We do not have that deleveraging cycle now. We have a horrible demographic cycle which will keep our economy nearly dead for the next 15-20 years, so I am NOT expecting anything much in US GDP. The biggest risk we have now is lack of leadership by our Government in the US and perhaps going down the path of poor tax and spend decisions. Trump scares me in this regard with his negative attitudes about the current state of trade. (I'm going to have to come back later to address your many other points).
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2use timwest
9 months ago
Hahah, i have never been in US and i still have the same concerns about Your leaders, Trump especially ( i dearly hope that he does not win...but frankly, Hillary is not the best either.).
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timwest PRO 2use
9 months ago
Both candidates are terrifying to me, but I can only be thankful for the checks and balances in the system that will prevent any President from ruining the nation. Thankfully the House and the Senate are great counter-balances. The history of the country of the USA is best described by the make-up of the House and the Senate then it is by the leader.
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2use timwest
9 months ago
In my view, it is less predictable with Trump. And noone likes that - i really dont know a showman who does not hold most of his words being president.
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2use mazer_rackham
9 months ago
To understand why go pro was up then, look at it now. Sometimes these high beta, beaten down, shorted stocks have this strenght and tend to carry on. It is up 10% today.
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kenny1924
9 months ago
Tim, great comments, great analysis and superb postings. Please post more even if it does not have commentary associated with it. Just your views with whatever disclaimers.

I did not see that you were looking for any clicks from readers since I have been a reader on your postings, but never clicked on "Thumbs Up" or "Star" etc. I will try to do more of it.

I think that we have more downside to go with margin calls, negative earnings, and also no positive news from Yellen today. It was just 'blah'. Negative interest rates is another big wild card for the US, although it is much more unreal, the perception of it becoming news and reality will spook the markets. Japan has already corrected on that news.

Finally, if China, India, Russia, EU, Greece/Germany/Italy/Portugal etc still come up with negatives, then we are in a world of more hurt. And, we have not had a correction in a while. Hence, this will be viewed as the 10% to 20% correction from top which mean 16xx to 17xx.
+1 Reply
timwest PRO kenny1924
9 months ago
Check my reply to Mazer I just posted. Thanks Kenny1924.
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kenny1924
9 months ago
AAII numbers since I read your comment about majority being Bearish.......We have a long way to go to approach the 60%-70% bearish levels although it could happen next week depending on how much we correct this week. These are number from week of 2/10/2016.

BULLISH: 19.2% down 8.3

NEUTRAL: 32.1% down 5.7

BEARISH: 48.7% up 14.0

Note: Numbers may not add up to 100% because of rounding.
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timwest PRO kenny1924
9 months ago
Bulls as a % of Bulls + Bears = 19.2 / (19.2 + 48.7) = 19.2/67.9 = 28.27% bulls. I think 25% is a major level of sentiment. That's a large horde of "neutral" at 32.1%
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Victor.Y.F
9 months ago
SPX500’s 200 weeks SMA comes to 1789 today. DAX dropped more but 8000 will be a very nice buy.
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john_silver
9 months ago
Hi Tim! Should we ready to go down? SP500 on the pivot-point - 1950-1980 or 1660? http://joxi.ru/ZrJOKGQH1eJVNm
Yes, we can! - obviously we have up-trend now since 2016
snapshot
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PKA
9 months ago
You could have the same people viewing multiple times though so I'm not sure how accurate that % is.
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timwest PRO PKA
9 months ago
I've monitored %agree versus performance of the ideas and it is quite remarkable. Yes, I pull up my own chart a number of times to see what the % is, so I influence the number too unfortunately. As for the S&P500, this 1812 level is the "panic" bottom ( a lucky guess really from last year ) so - we shall see. The market is a giant beast that is going to do what it needs to do to flush out the weakest players who are leveraged, so keep your eyes and ears tuned.
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PKA timwest
9 months ago
Tim that's completely fair, I was just pointing it out. I do agree with your chart though!
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timwest PRO PKA
9 months ago
With 52 agrees on 2347 views, the ratio is down to 2.2%. Less agreement.
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timwest PRO timwest
9 months ago
60 agrees with 3109 views is less than 2% agreement. Not many users think to click on "agree".
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Chief_Tardis
9 months ago
Hi Tim, great chart and analysis...I am seeing the negatives you mentioned taking more weight this year than the bullish sentiment....I could be wrong but I will be in a hedge play watching out for any signs of collapse
My main views:

1. Cyclical - end of the bull market
2. Recession
3. Oil Damage
4. China
5. Russia in Syria
6. North Korea
7. Tech fall out


well, wanted to publish this for the bear market that we are in
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timwest PRO Chief_Tardis
9 months ago
I don't think we need to collapse 50% again like we have done twice in the last 15 years. I really believe that sideways causes the most frustration for all investors and is therefore the most likely outcome. The earnings yield of the market isn't that bad with 6% or so yield here. The US Gov't bonds don't yield much and Corporate Bonds are yielding a very attractive return at the moment for fresh capital. If we get a slight recession, high yield bonds have already forecasted and discounted that. This is a good time to sell calls for the year "at the money" here at 1920 on the S&P500. If we get prices down under 1850, you can buy or just sell "at the money puts" for the balance of the year. I think that selling both sides of the options will yield great returns for 2016 to the tune of 10%-12%. 3% for buying under 1850 and 7% for collecting premium from here at 1915-1920 last in the S&P.
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Chief_Tardis timwest
9 months ago
Awesome and thanks!!!
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Victor.Y.F
9 months ago
There will be new highs after FRB devaluating USD this year, more QE or negative rates, you name it. We will see inflation and indexes both are very high like in 2009- 2011. BTW, I'm not trading in USA, this claim could save a lot of time from US government which is investigating my tax situation.
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elp
9 months ago
The monthly BB width are at an extreme that has only occured in 10 periods, yrs 1951-2016. 9 out of the 10 periods the S&P500 went on to make a new all time high. Only once when in a similar setup price broke down and did not make a new all time high. Odds are in favor that the S&P500 breaks out to the upside.
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timwest PRO elp
9 months ago
I like the odds from this BB tightness and a small problem I have with the chart is just how tiny the 1987 crash (40% drop in 3 months) looks on this time frame. Would you mind dividing this by inflation (CPIAUC) to get a "real correction" visible. Additionally bullish data points would include "EXTREMELY HIGH SHORT INTEREST ON THE NYSE" and "EXTREMELY HIGH BEARISH SENTIMENT BY THE AAII" and "EXTREMELY HIGH EQUITY WITHDRAWALS FROM EQUITY MUTUAL FUNDS". Each of these individually is bullish and when all put together are extremely bullish for equity prices in the near term to medium term. The offsetting bearish factors, like demographics and weakening corporate cash flows and margins, will be an offset and wind in the faces of advancing equity prices. So, net-net, the balance going forward is more equal and allows for tight movements around the current level of equity prices. It's a giant game of tug-of-war and there will be movements back and forth. Keep an open mind and let's keep a ledger of the bullish and bearish factors so we don't forget that prices don't decline forever and they don't rise forever in a straight line.
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elp timwest
9 months ago
Yes I see what you are mentioning. yr 2000 highs have not been broken when priced with the CPI. Looks like a range has been set with yr 2000 highs as resistance and yr 2007 highs as support. Could continue to go sideways for longer than many believe. That could be the move to grind of the bulls and the bears. TY for pointing this out!
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elp timwest
9 months ago
If you could answer this question it would be helpful. I was looking at the S&P100. Yahoo data from Quandl shows price has not broken out of yr 1997 highs. When going to Yahoo directly it does not show this 1997 high as a major high. I googled S&P100 but could find no explanation. Was there some sort of rebance of the OEX? Or is this just bad data from Quandl.
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timwest PRO elp
9 months ago
It looks like bad data. I haven't looked at the OEX in many years. It used to be the index of choice many decades ago and where all of the options volume was traded, but not any more. The extremely large decline in Nov 1997 is an error. I hope you can figure it out.
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Victor.Y.F
9 months ago
Thanks Tim! It is beginning, let's see how high the DXY can go.
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timwest PRO Victor.Y.F
9 months ago
I'm looking for the DXY to fall for the balance of the year and perhaps for the next 3-10 years. The logic being that the US has lost its competitive position with the Dollar this strong. Also, as we cut rates to join the rest of the nations around the world, the Dollar will drift lower with frequent drops and sharp rebound rallies. Overall, the trend I believe is down - at least "not up".
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Victor.Y.F timwest
9 months ago
Thanks for replying. DXY is leading SPX several months that's why I'm sure this one will go up. After G20 I think central banks can do what they want and I guess everything is back on track. The tricks FRB are playing, pressing inflation by devaluating EUR, improving export by devaluating trade weighted USD wdtexm, supporting stock markets by devaluating JPY. FRB has to change the dot-lot now. But the problems are still there, EUR's devaluating equal to DXY rising it's the formulation of maths, USD's delaying of rising rates will push inflation up which equals to EUR's rising, so they both want to be weak but the DXY formulation is the rule of God, a mathematics conundrum. I agree with you Dollar will drift sideways and EUR will do the same too. The EUR will drift lower to it's targets 1.0 and 0.85 after all in 2 years. So it's good for SPX and DXY. For the long run I think the DXY has to change the formulation of USD vs. Mark (EUR). Also a problem for the JPY, renminbi's easing equals to JPY's rising, JPY is becoming too strong to support the SPX. So it must draw capitals from JPY, here comes the key, the Shanghai composite index has to keep rising by devaluating EUR. (Which is the market everyone wants to short. )
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Victor.Y.F Victor.Y.F
9 months ago
There are geopolitical risk and inflation rate too high risk. Geopolitical risk will push JPY up and if inflation is too high renminbi has to rise rates then the Shanghai market will crash . If those happen then the global markets will be in a mess. If those happen we'll see a plan of new QE from FRB.
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Victor.Y.F Victor.Y.F
9 months ago
Two scenarios are both possible and The time could take 5 years for reaching target.
In case FRB rises rates 0.5%
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GalShafat PRO
9 months ago
So Far Your Chart Is Bingo
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timwest PRO GalShafat
9 months ago
Thanks @GalShafat - I put a lot of thinking into that chart. I also put my money where my mouth is.
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Though I am bearish long term and at current prices; this is more an observance of strong S/R levels based on buying selling climaxes, not a forecast.
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2use
8 months ago
Yet again, thanx for the update and i will check @LizAnnSonders twitter feed. Regarding the next bottom - won't it be close to inverse head shoulders to go even higher?
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timwest PRO 2use
8 months ago
The market will make some new patterns this time to shake out the pattern followers. The market will often just go to where the most volume will trade.
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RationalTrader
8 months ago
Dont forget the fundamentals of this type of bull market. I don't think I will ever short this market, just buy, exit, an buy again at potential bottoms. Have you read this classic about SPX and similars by Bogle? http://213.55.83.214:8181/Management/01278.pdf
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RationalTrader RationalTrader
8 months ago
sorry, meant this link; https://en.m.wikipedia.org/wiki/Little_Book_of_Common_Sense_Investing
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timwest PRO RationalTrader
8 months ago
The fundamentals include the "psychologicals" since it doesn't matter what is really true, but rather what people think is true. When people are scared, they see what they believe and react based on fear instead of logic. When people are hopeful, they disregard bad news. Thanks for your links and hope you enjoyed the list of bullish arguments that I made when the market was bottoming. The fear was very pervasive at that time and there were very few bulls.
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RationalTrader timwest
8 months ago
Yes, I've kept an eye on you a few months, good call around guessing the bottom of SPX Tim:) I'm sending you a private message here as well if you have the time, -only want to discuss strategies.
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kemal.erdog timwest
8 months ago
timwest is the best. %100
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JamieGiger
8 months ago
I wish we can see future time markers to see and guess an approx time we will go to horror, excitement, etc.
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JamieGiger JamieGiger
8 months ago
Love your charts by the way!
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timwest PRO JamieGiger
8 months ago
Thanks.
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timwest PRO JamieGiger
8 months ago
If you click on "make it mine!" button then you can see the dates that I drew out on the chart. It is more of a sequence and a pattern within the calendar year. But I've been very lucky with the forecast for the past 4 years in the way I have rationalized the basic fundamental backdrop of supply and demand for equities overall.
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coolingla PRO
8 months ago
This chart is so valuable that why not everybody here is talking about it is curious too me.

I would venture to say this chart also shows the path of oil price this year. Oil price has become a tool for people to gauge the overall health of the economy lately and thus the high correlation between oil and spx.

The next month 1-2 months will most likely see the final bottom of oil.

I wanted to comment long time ago but was traveling...
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hey can you post that multi time period chart script, please? i cant find it anywhere.
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timwest PRO liftedAnalytics.Lmt
7 months ago
Search for "multi-time-period-chart" in the indicators menu. Or "MTPC" and play around with the formatting to get it just how you want it. The default settings work pretty well.
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coolingla PRO
8 months ago
I think the down turn will start next week.

Just opened a small short on SPY.

Let's wait and see.
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timwest PRO coolingla
7 months ago
I haven't done any shorting as of yet. I am considering exiting all longs at the close of today, April 19, 2016 but there is still a strong sense of doubt out there about this rally which gives me comfort in staying long.
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coolingla PRO timwest
7 months ago
Tim,

I exited my small short SPY fairly quickly. The market was in a good mood.

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2use
7 months ago
Did "horror" get postponed
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timwest PRO 2use
7 months ago
Evidently "horror" was postponed, but there is a possibility of horror with the new earnings season that is upon us. We can see what that has in store for us. Watching how the market absorbs news is critical to making any decisions in any market condition. This week has a large proportion of the DJIA elements reporting their earnings. It is an epic battle going on between the bullish and bearish factors, between very low bullish sentiment despite the rising prices, the very low level of VIX (I think VIX is low because investors are selling calls to generate income, which is bullish), ZIRP and NIRP and Corporate buybacks are also hugely bullish. Weakening margins are bearish and a weakening US Dollar is a relief for repatriating earnings. .... Stay tuned! And keep watching @LizAnnSonders at Twitter.
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coolingla PRO timwest
7 months ago
Tim,

I agree the market is very close to topping (at least a very short term top) now, but the overall trajectory of SPX in 2016 might have to be revised upward a little bit.
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2use timwest
7 months ago
I look at it as a 3rd top in the recent 20 years, and what makes me wonder is "what if the market does it again" and fools everyone awaiting the top ...and grinds higher? i read your comments, and i see you feel it won't g o higher, and stay sideways at least. is this for 2-3 years? and what would you expect afterwards?
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timwest PRO 2use
5 months ago
I see a grinding sideways period for a few years, then drift upwards. We have already had a massive correction and when you toss in inflation, the correction was even deeper and more psychologically destructive. The way to frustrate forecasters the most from this point on would be sideways. You need "sellers" to drive prices down and the market is already short to a great degree. There is plenty of cash on the sidelines too as fear-mongerers convince investors to have cash ready for bear markets. There was a great bear market in oil stocks and I don't recall seeing anyone suggest to back up the truck and load up on oil stocks when they were low with oil near $30. It's hard to track, but I think the overall stance was $10 was more likely when we were at $30 oil and now we are sitting close to $50 and the forecasts now seem to be for higher prices. The consensus is easily tricked. The long term trend is up because we continue to figure out ways to make things cheaper and automate work, which frees up our creative minds to find new things to do and new things to create. So, I view the long term trend as UP because of this basic human need to make things better and to "have more". Demographically we are challenged by an aging population which is a headwind to economic progress. As we age, our spending patterns change. Read Harry Dent's books on this topic since he covers it the best, in my opinion.
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2use timwest
5 months ago
Scoring +1 for this comment. I will spend some time processing it and the idea behind it
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JJCaribe007
7 months ago
Well done Tim.

My target for the S&P is much higher: 2030.

I believe we're headed for a late spring/early summer top, followed by noise, some volatility, and then a hotly contested, close (and hopefully not chad close/court decides close) Presidential election. This, historically, is awful for the markets; they hate uncertainty (see: Bush v Gore - 2000).

Fundamentals do not matter in this "rally". Anyone with half a brain knows what is REALLY going on here - and if not, I hope they have stops in place.

Scanning the casinos....because mostly...they are....

Respectfully,

JJ
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GalShafat PRO
6 months ago
any updates here?
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timwest PRO GalShafat
5 months ago
Ready to update given the swift lift in sentiment to multi-year high readings... a top is near. It looks as if we hit 'euphoria' on the likely nomination of Clinton for the Democratic Party. Earnings were lackluster for the latest reporting period and the US Dollar has slightly helpful year-over-year rates of change. I'll suggest writing 6-9 month AT THE MONEY CALL OPTIONS against any market positions. With VIX elevated to 17 from a recent 13, this could be a decent return as I assume a sideways market for the balance of the year. 2096 last SPX.
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2use
5 months ago
I did take in account this forecast. But i have a question - it ends with Euphoria, but is there a chance it is to be lower? Not to call doom and gloom, but seems euphoria is a tough card to play
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timwest PRO 2use
5 months ago
I believe we hit a 'Euphoria' moment there when I wrote that 19 days ago. The 5% slide also brought back fears of doom & gloom and depression very fast. The market is doing its best to challenge everyone watching it and participating. Think about the Four Horsemen of the Apocalypse: George Soros, Stan Druckenmiller, Bill Gross and Carl Icahn, who are very vocally bearish on the market and heavily short. That is a pretty rare occurrence for them to be that negative and advertising their positions for the world to see. These are challenging times and this is why sideways is the way that will frustrate the most investors for the longest time. Short positions cost money to carry, so sideways hurts them. Longs get frustrated by sideways too as they only earn 2% dividend yields, on average, which is barely a return on capital. Bond owners are thrilled their bonds are up in value, but income has crashed and now stocks look attractive as an alternative to bonds for the long term. If we get inflation, stocks benefit while those bonds that are high priced now will collapse with inflation. The BIGGEST RISK RIGHT NOW IS THE US GOVERNMENT and ANY SHIFT IN TAX POLICY. Imagine a new, stimulative "Investment Tax Credit" like the one engineered by Ronald Reagan to get the economy going after 16 years of stagnation back in 1982. If we get a new, stimulative tax law or "stimulant", we could see the stock market lift while bond prices slide. The long term pattern is for the next President to be very "Reagan-Like" in their decision making because Obama was a copy of Carter in many ways. If you see my other chart on this pattern, "the long term pattern of 10X moves in the stock market followed by...." then you can draw the same conclusions.
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ankitkedia1
5 months ago
Aint happening !! Bear is the outlook ! Short
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timwest PRO ankitkedia1
5 months ago
What is your perspective and what time frame are you commenting on? Brexit decline? Remember too it was "post-quarterly options expiration" that helped create illiquidity. We had perhaps the largest expiration of S&P500 put options which meant investors had the "least hedged" position in a long time. At the same time you had concentrated bets in currencies that helped trigger moves in the markets. Let's keep watching the big picture and I hope you didn't get hurt too bad in the rally we've seen from the lows.
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2use
a month ago
"Expect guidance down" do i read your sentiment as bear?
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timwest PRO 2use
a month ago
I've just finished reading this entire sequence of comments and I'm worn out. So far, the earnings coming out are more positive, but recall executives might want to soften expectations for the coming quarter given the uncertainty of the election and the fact that things have likely been very soft for the past few weeks, which portends a weak quarter. I believe the amount of short positions and the amount of cash on the sidelines will minimize the downside potential here to a large extent. Also, with sentiment at 22% bulls, the lowest in ages at AAII, I think there is very little downside at all. Consider what INTC reported where they guided down expectations. We have a lot of earnings reports left to review, so be attuned to those as they come out.
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timwest PRO timwest
a month ago
So, I'm not "bearish" but bullish with some acceptance of some downside in the near future, but more and much more upside after that. If Hillary wins and comes out with a huge new tax, then all bets are off and the downside will be more likely.
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2use timwest
a month ago
So i read you are starting to take it to the sidelines once the election results are out and if Hillary wins? I suppose some would take it down already then in fears of the policies she may propose.
About the bull case - well, i like the sentiment analysis, but is there that more ground upholding the higher highs case? Dollar is also rising currently and we are already on all time highs, if i play the bull card it will be of course with more caution - im still waiting for a correction to happen cause everything feels overpriced
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kenny1924
a month ago
Yes, it is this extreme bearishness amongst traders, investors and global funds that is really keeping S&P500 and Nasdaq 100 in the stratosphere without breaking down, and even when it breaks down, the cash on sidelines just does not let it touch any of the support levels / Fib levels / EMA levels, but bounces right back up, as if they were hungry to invest. Now, someday this party has to end, but with Hillary = Bull and Trump = Bear thought process going on, and the edge that Hillary has, you might be right about the Net-Bullishness around the corner. Mix that up with the earnings right now, bullishness in some of the Asian markets, and we have a combination of markets climbing up the wall of worry.

I am playing the entire market through options instead of playing with full equity positions which limits my risk, while maintaining a small short position. But, I am a small investor with majority in cash and real estate which I am enjoying more and driving deeper into the real estate since 2008-09. Yet, at the end of the day, I think investing in India and China are the future, and hence Value Cost Averaging into those markets with the belief that regardless of Hillary or Trump or the next president, our time is being the Super-Power is almost over (see the 250 year cycle analysis on the net), and therefore, what British Empire faced a few decades ago, is going to repeat itself with the power status changing. So, when I hand the portfolio to my kids, I am not told 'what was I thinking about putting all my eggs in the US basket'!!!!!
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