Fall 2013 Stock Market Forecast

As the Fall Season approaches, U.S. Stock Indices are at an important juncture. Indeed, the S&P 500 seems poised to resume its own fall from August 2nd highs. Our fall 2013 stock market forecast follows.

Stock Market Forecast Fall 2013

A student of the world economy and capital markets, Steven has applied dynamic system modeling principles to the burgeoning field of econometrics as well as to programmatic trading in equities and options. As an active trader, Steven has achieved a success rate of over 92% in positional equity trades.

Fall Just Around the Corner

From the chart below, we can observe a number of key technical points:

• The highest probability Elliot Wave count defines the August 2nd high as a lasting top;
• The first of many moves down began with Wave 1, which bottomed at 1627 on August 28th;
• Based on its internal structure, Wave 2 up appears close to topping;
• The S&P 500 cash index gapped down from 1685 on Aug 15th. That gap is now closed, as is the equivalent price gap in the DJIA;
• Resistance lies between 1692-1700;
• Daily Stochastics indicator (dashed green circle) shows that the S&P 500 is currently at an overbought level of more than 95%
• The initial price target for Wave 3 down is 1610. By definition, Wave 3 down must be larger than Wave 1.

In addition, there have been six confirmed observations of the “Hindenburg Omen” since early August. This indicator is an overall reflection of market health and reliably portends an imminent fall of 10% or more in index prices.

Furthermore, the economic and geopolitical backdrop is not at all supportive of fresh recovery highs in the three major stock indices:

• Situation in Syria may have temporarily abated with a chemical weapons agreement, but even this may put short-term downward pressure on oil prices and the energy-rich S&P index
• The FED will likely begin tapering bond purchases with the September FOMC announcement. Peaceful resolution of the Syrian dispute will further quiet any related move to postpone tapering
• The fiscal debt ceiling looms large as the U.S. is poised to default on its debt by the end of October 2013
• FED Chairman “Helicopter” Ben Bernanke will likely be replaced by a candidate with far less accommodative policies

In short, major indices are likely at or near the top of the retracement from the first major sell-off. While the S&P 500 index could rise as much as 1708 without penetrating the August 2nd high, it is more likely that September and October will bring a precipitous fall in both prices and outside air temperatures.

This article should be of interest to investors in the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones (NYSE: DIA), PowerShares QQQ (Nasdaq: QQQ), ProShares Ultra Short S&P 500 (NYSE: SDS), ProShares Short Dow 30 (NYSE: DOG) and the ProShares UltraShort QQQ (NYSE: QID).

DISCLOSURE: The author is currently short the S&P emini contract. He currently plans to cover his short position if prices rise above 1705. 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.