According to Sir John Templeton, “ Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”
Clearly, we are between optimism and euphoria fueled by the fantasy that President-elect Donald Trump will be Corporate America’s best friend…
I just wanted to share with you two charts.
S&P500 regression channel since 1996 (monthly)
Interestingly, we are getting close to +2 standard deviation which is clearly a sell signal. However, overshoots are possible! During the Financial crisis we fell well below the -2 standard deviation line.
Conclusion >> an overshoot lead by trumphoria might push the index towards 2500…
S&P500 chart since 1996 (monhtly)
if one believes in math you might want to check this second chart. If you subtract 666.79 (Financial crisis low) to 1580 (2013 break-out level) you get 910.21 points. Add 910.21 to 1580 and you get 2490.21 !
One might argue that technical analysis and math in finance are useless. Well, you might want to reconsider your view, especially in 2017.
Remember that more and more investments are executed by machines that follow moving averages, fibonacci retracements, regression etc……………….
Conclusion: short term, i remain cautious (click here to read my latest chart on the vix) but longer term, i feel that 2490.21 is totally possible fueled by tax cuts, earnings growth, inflation, share buybacks, above average growth and EUPHORIA !
To be continued…
NB: if we get close to 2490.21 sell everything and go short 😉
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