2018 - basic outline for the year - as published here in my chatroom - Key Hidden Levels.
I see "no gain" for the year as the market chops sideways and then musters strength for a move up next year as the full impact of the new Tax Law kicks into full effect, driving Capex, Buybacks and re-distribution of wealth.
Time will tell, but given the extreme calls for more upside and for horrific crashes, I think the more obvious solution is for choppy sideways action for the whole year +7% to -7% from where I drew this graph back on January 23rd.
The comments section from the 2017 Forecast are useful to refer back to and to re-read now.
I look forward to your questions and comments.
Tim 12:50PM EST Feb 7, 2018
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The sideways choppy action I foresaw for 2018 is patterning quite well so far:
There have been 2 VIX buy signals for the overall market so far this year which reveals accumulation by large buyers. Another accumulation signal is close to signaling. Time will tell.
We will start to see nervousness ahead of the summer-fall campaigns for mid-term elections, which will distract us all.
Stay tuned and visit the Key Hidden Levels chat room for updates and insights.
Tim 4/5/2018 11:48PM EST
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REPLYING TO QUESTIONS IN THE KEY HIDDEN LEVELS CHAT ROOM:
Additional comments on April 25, 2018 at 1:49PM EST
I just see "sideways" due to extreme opposing forces.
1. Optimism fading after extreme optimism from Tax-Reform, to mimic the 1981 peak in the stock market after Reagan's similar tax cut.
2. Earnings yields are low relative to historical levels, but strong overall and stable and protected from inflation long term.
3. Crude Oil's advances are damaging to spending by consumers and hurt earnings prospects overall.
4. Massive bearish sentiment and equity outflows for the past year and before. People are not invested in this market.
5. Wealth is increasing as people are employed and saving for retirement through pension funds.
6. Home values are increasing which diminishes potential selling from individuals going forward.
7. Corporations are still buying back large amounts of shares.
8. Issuance of new shares is still minimal and shares have been declining for many years. (Bullish, obviously).
9. Margin Debt is high, but that is a coincident indicator and not a predictive indicator.
10. Mid-term elections this fall will make for another NEGATIVE news environment and keep a check on stock prices. Trash talk usually has that effect to keep optimism low.
11. Waiting for very strong corporate investment in the 4Q to take advantage of the new tax law's depreciation. The economy will be "on fire" at year end, in my opinion.
Stay tuned....
Tim
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Right on track here for a nice "sideways year" and with election season just ahead it will get ugly in the media. I know, it is always ugly.
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Still moving along nicely with various sentiment readings suggesting strong hedging is going on, which provides support on any weakness. Extreme fear that "THIS IS THE TOP" or "RECESSION AROUND THE CORNER" is expressed across all media channels and also gives support to stock prices especially on weakness because there is very little stock for sale at current prices. Earnings are coming in strong and with tax breaks getting removed from high end real estate, that will funnel more cash back into the stock market also providing support on any weakness. The Fed has taken a few steps this year to attempt to remove some of the accommodation (free money) to the markets to support asset prices. The earnings season is building a new level of support for the overall market here and election campaigns will be going full throttle within a month to keep sentiment lower than normal. So far, so good for the 2018 year forecast. 7/18/2018 Tim
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Not much has changed: We've hit a situation where the market was vulnerable from a variety of reasons. 1. Options expiration completed. 2. Earnings season starting and stock buybacks are on-hold. 3. Sentiment reached a peak with options SKEW on the SPX500SPY indicative of strong bullish sentiment. 4. Gold market turned from a downtrend and formed a base from which a rally had started. 5. Bank stocks are weak, following weak home builder and automobile manufacturers. Generally speaking it is not bullish when banks are declining. 6. Oil was breaking out recently - which puts pressure on consumer spending and acts like a tax on the economy. 7. Short term US Gov't interest rates have shot up quite a bit and are offering a yield now above the reported inflation rate. The rise in rates has many skittish because the Fed is hiking and making the borrowing costs rise even faster for the US Gov't. It's akin to driving off of a cliff. 8. Coming into year end, stocks were dramatically outperforming bonds, which means there was room for stocks to be sold and bonds to be purchased to rebalance.
The market is digesting these issues and attempting to rebuild a base of support at previous Q1 and Q2 quarterly earnings reporting levels.
I'm watching SKEW for it to jump back up to 135-140 to indicate an important bottom.
Stay tuned in the KEY HIDDEN LEVELS CHAT ROOM for more updates.
Tim 4:13PM October 23, 2018
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2019's forecast wasn't made until March this year and only in the Key Hidden Levels Chat Room -
I should say that this IS a really CHART OF THE YEAR!
Again ;)
nakov
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thank you! very insightful comments on the outlook of 2018!
plok
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Thanks for putting your brain on a chart!
michaelkid_wang
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Hi Tim, so comparing to the previous idea "1981 SPX500 TOP ON REAGAN TAX CUTS & 27% CORRECTION FOLLOWS", you don't think there will be a big correction this year? Thanks.
timwest
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@michaelkid_wang, I have tried to think about all of the factors that will drive the market this year, including putting in a new Fed Chairman, to come up with a logical pattern like I have done the past 6 years. The budget deficit and massive Gov't spending programs certainly have our attention now after the Tax Cut. Toss in the wage inflation we saw last week and the steady rise in 10-year rates and we have some rationale for people to continue to pare back in equities and begin to reposition in different sectors. It's a brilliantly complex puzzle that we can analyze each day. The mid-term elections this year should be the most uncertain time for the market, so I put the deepest correction then for the market.
Again ;)