S&P 500 Index Winter Forecast 2009-2010
Unseasonably Cold Quarter Ahead
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(Tickers: NYSE: PIZ, PIE, PDP, DIA, SPY, NYX, DOG, SDS, QLD, IWM, TWM, IWD, SDK, ICE, Nasdaq: QQQQ, HTOAX, HTOTX, HTOBX, JTCIX, JTCNX, JTCAX)
To this point in our search for a top to the bear market rally, we have examined conventional technical indicators and market analysis methods. The most advanced of these methods has been the Elliot Wave pattern identification approach, which is based on market psychology as it emerges in a series of robust fractals. These create an identifiable pattern in market indices which, when coupled with indicators of sentiment and market breadth, have all been pointing to a major top since August. However, the "alternate Elliot wave counts" have continued to prevail as the market has defied weak fundamentals and continued to reach new highs.
Indeed we wonder if the Fed can continue to prop this market up indefinitely, all for the benefit of Wall Street fat cats but to the detriment of Main Street and our Nation altogether. A jobless recovery is simply not possible, in my view. And I expect that when the eventual, failed outcome is evident, public sentiment will turn en masse against the banks, the Federal Reserve and the US Government as a whole. This revolt will be the subject of an upcoming piece, but looks to be close at hand, at least based on a more advanced forecasting method. This method, Time Series Analysis, is the subject of our final installment in the search for a bear market top.
The figure below depicts a twenty week forecast of the S&P, based on such a time-series analysis. There are many methods to produce such a prediction, some of which are multivariate in nature and are based on fundamental data such as interest rate, unemployment, GDP, etc. Such econometric forecasts typically employ applied statistics and autoregressive moving averages. Indeed, the Federal Reserve endeavors to make such forecasts in order to identify (and presumably prevent) asset inflation.
If the Fed would only read Wall Street Greek, we could save them some work and a whole bunch of money. Allow us to simplify matters for the meddlesome eggheads: the Central Bank has indeed created a new bubble and it will soon pop.
Where most time series models are formulated in the time domain, the methodology behind this forecast is instead solved entirely in the frequency domain. Market cycles are analyzed to fit a mathematical model, which in turn is used to forecast future results. Economists and mathematicians may argue that such an approach will only work for a stationary time series; however, related details have been accounted for in this proprietary solution.
Will the forecast prove accurate? Time will tell. Indeed, the methodology is better suited to shorter term, higher frequency data. However, to this point, the weekly forecast has predicted only a continued rise in the index, whereas the data to the right of the vertical line on the chart clearly depicts the cold winter forecast ahead. When coupled with Elliot Wave predictions, a failed head and shoulders pattern, suspect fundamentals, and little or no top-line earnings growth, this prediction may finally indicate the top is in. Caveat Emptor!
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article may interest investors in NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.
Visit the front page of Wall Street Greek to see our current coverage of Wall Street, economic reports and global financial markets.
(Tickers: NYSE: PIZ, PIE, PDP, DIA, SPY, NYX, DOG, SDS, QLD, IWM, TWM, IWD, SDK, ICE, Nasdaq: QQQQ, HTOAX, HTOTX, HTOBX, JTCIX, JTCNX, JTCAX)
S&P 500 Index Winter Forecast 2009-2010
To this point in our search for a top to the bear market rally, we have examined conventional technical indicators and market analysis methods. The most advanced of these methods has been the Elliot Wave pattern identification approach, which is based on market psychology as it emerges in a series of robust fractals. These create an identifiable pattern in market indices which, when coupled with indicators of sentiment and market breadth, have all been pointing to a major top since August. However, the "alternate Elliot wave counts" have continued to prevail as the market has defied weak fundamentals and continued to reach new highs.Indeed we wonder if the Fed can continue to prop this market up indefinitely, all for the benefit of Wall Street fat cats but to the detriment of Main Street and our Nation altogether. A jobless recovery is simply not possible, in my view. And I expect that when the eventual, failed outcome is evident, public sentiment will turn en masse against the banks, the Federal Reserve and the US Government as a whole. This revolt will be the subject of an upcoming piece, but looks to be close at hand, at least based on a more advanced forecasting method. This method, Time Series Analysis, is the subject of our final installment in the search for a bear market top.
The figure below depicts a twenty week forecast of the S&P, based on such a time-series analysis. There are many methods to produce such a prediction, some of which are multivariate in nature and are based on fundamental data such as interest rate, unemployment, GDP, etc. Such econometric forecasts typically employ applied statistics and autoregressive moving averages. Indeed, the Federal Reserve endeavors to make such forecasts in order to identify (and presumably prevent) asset inflation.
If the Fed would only read Wall Street Greek, we could save them some work and a whole bunch of money. Allow us to simplify matters for the meddlesome eggheads: the Central Bank has indeed created a new bubble and it will soon pop.
Where most time series models are formulated in the time domain, the methodology behind this forecast is instead solved entirely in the frequency domain. Market cycles are analyzed to fit a mathematical model, which in turn is used to forecast future results. Economists and mathematicians may argue that such an approach will only work for a stationary time series; however, related details have been accounted for in this proprietary solution.
Will the forecast prove accurate? Time will tell. Indeed, the methodology is better suited to shorter term, higher frequency data. However, to this point, the weekly forecast has predicted only a continued rise in the index, whereas the data to the right of the vertical line on the chart clearly depicts the cold winter forecast ahead. When coupled with Elliot Wave predictions, a failed head and shoulders pattern, suspect fundamentals, and little or no top-line earnings growth, this prediction may finally indicate the top is in. Caveat Emptor!
Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only. Article may interest investors in NYSE: PIZ, NYSE: PIE, NYSE: PDP, NYSE: DIA, NYSE: SPY, NYSE: NYX, NYSE: DOG, NYSE: SDS, NYSE: QLD, NYSE: IWM, NYSE: TWM, NYSE: IWD, NYSE: SDK, NYSE: ICE, Nasdaq: QQQQ, Nasdaq: HTOAX, Nasdaq: HTOTX, Nasdaq: HTOBX, Nasdaq: JTCIX, Nasdaq: JTCNX, Nasdaq: JTCAX.
Labels: Ferguson
posted by The Greek | 7:03 AM
3 Comments:
Wall Street is Main Street, Main Street is Wall Street.
Assets of retirees and employees of local, state, national, business, corportate, private and even lemon-aide stand owners are participants in it.
Those that stayed in, or bought at the bottoms have recouped some if not most of what they lost.
Elliott Wave is a bean counters fantasy, and noone can predict what Mr. Market will do.
The naysayers would have had you out of the market and hiding in your bunker a year ago.
The world will come to an end, sooner rather than later, that is a certainty.
If you want security: live within your means, set aside cash to get you through the near term, and play the Wall Street game, while it lasts.
Prechter got it right, once.
Gentlemen, good to make your acquaintance.
I like your analysis, am a Prechter follower and believe it is painful to watch the networks rally the troops into this next crash.
The Fed has provided cash to the very banks that caused the mess we are in. I have been in the mortgage industry for years and lived the FIRREA era of the S&L debacle as well. Originally, the Fed, under Bush, was to provide a mechanism much like the RTC under his father, to repurchase all of the toxic assets from the banks and liquidate them in an orderly fashion; this in itself would lead to general deflation, but not to the same degree that the current plan will in any event. Anyway, the Fed in its infinite wisdom, against the guidance from very smart people, Liz Warren etc, decided to just give them blank checks. This funding was to provide credit to the masses, and to cushion the RE bubble from all of the massive RE exposure these institutions had on their books for loan loss provision. Additionally, the Legislature, and at the same time! took away the mandate to mark to market those very assets.
So, what did these bank geniuses do, they pocketed the money, slowed the credit process and raised their fee rates across the board. Now they are going to sell stock to pay back the Fed, and this will screw the investor who buys the stock as:
Look at the mountain of mortgage resets that will occur in 2010 beginning in February and tell me what you think will happen? Loan losses will be disclosed, mortgage FC's will rise dramatically, BK's will follow, and we will be in a huge deflationary spiral.
Check your chart again, I don't believe it is entirely accurate for next year. S&P will drop to ~450.
Sorry for the long message, keep up the good work.
Great comments. I appreciate the feedback even if I have differing opinions
Elliot Wave forecasts have had mixed success. Just FYI, the current wave count suggests (again) that the top has arrived.
I definitely disagree that Wall Street has Main Street's best interest in mind
Trickle down economics used to work by encouraging capital wealth formation
Today, the likes of Goldman Sachs have their own self interests in mind. That 401Ks recovered 40% of their losses is a collateral benefit
When they are ready to sell, they will with impunity. 401K accounts won't matter. As far as that goes, Main Street does not universally benefit from 401K holdings in this lost decade
More important, none of this asset appreciation or restoration of their balance sheets has prompted any real lending. I dealt with this in a subsequent piece
If as a small business owner I could tap into lending at 0-0.25% interest, I would create 50 jobs within a few weeks. GS, JPM, et.al. take the money and "rape" other participants in the stock market for gains from HFT
So you tell me how Wall Street and Main Street are the same....
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