Poll 36: Stock market this fall.

[Jim Nickerson]

From Barrons 9/11/06 in http://online.barrons.com/article/SB115775632699158128.html?mod=9_0031_b_this_weeks_ magazine_market_week subscription required. Ned Davis and Bruce Bittles are quoted:


Ned Davis of Ned Davis Research last week lent credence to the notion, aired here recently, that the "four-year low" thesis had become something of a comfy consensus. "The mid-term election year lows of the four-year cycle in October have gotten way too popular, and accounts have positioned themselves for such an event. The market rarely accommodates the majority view," he wrote to clients.
In a like vein, Robert W. Baird investment strategist Bruce Bittles says, "The wide media coverage of the seasonal tendency of stocks to underperform this month suggests this September could be an exception to the rule."

The current iTulip poll @ 10:38PM EDT showed what I interpret as 65% bears and 10% bulls with 160 having voted. I track some bull/bear polls, i.e. AAII and measure the bulls minus bears. The most negative reading I have back some 6 years is minus 36.9 on 2/21/03 (Bulls then were 21.0 and bears were 57.9, and that was not at all a bad time to be going long). That compares to the current iTulip measure of minus 55.

The only "positive" thing I see about the equity markets presently is the rather extreme negativeness of iTulip visitors and the fact the equity markets have gone up from June/July lows. The AAII Bu-Br got down to minus 33.9 on 7/21/06 which for the moment "tagged" closing lows for the NDX and RUT.

So who is going to win from here until the end of the year:few bulls or lot of bears?

Does anyone wish to put forth any substantive reasons the markets will rally from here to year's end?

[jk]

from richard russell, 9/7/06:

Investor sentiment has been remarkably bullish over recent months. I mean, if a meteor a mile wide was to hit the earth, investors would be calling their brokers to find out which companies might win the contracts to handle the clean-up job. The war in Iraq goes badly, the President's approval rating probes the lower depths, oil remains in a high range, housing is tipping out, the savings rate in is negative, US deficits continue at a frightening rate -- yet, miraculously, nothing seems to worry America's intrepid investors.

[Finster]

From Barrons 9/11/06 in http://online.barrons.com/article/SB115775632699158128.html?mod=9_0031_b_this_weeks_ magazine_market_week subscription required. Ned Davis and Bruce Bittles are quoted:



The current iTulip poll @ 10:38PM EDT showed what I interpret as 65% bears and 10% bulls with 160 having voted. I track some bull/bear polls, i.e. AAII and measure the bulls minus bears. The most negative reading I have back some 6 years is minus 36.9 on 2/21/03 (Bulls then were 21.0 and bears were 57.9, and that was not at all a bad time to be going long). That compares to the current iTulip measure of minus 55.

The only "positive" thing I see about the equity markets presently is the rather extreme negativeness of iTulip visitors and the fact the equity markets have gone up from June/July lows. The AAII Bu-Br got down to minus 33.9 on 7/21/06 which for the moment "tagged" closing lows for the NDX and RUT.

So who is going to win from here until the end of the year:few bulls or lot of bears?

Does anyone wish to put forth any substantive reasons the markets will rally from here to year's end?

I just put up a new forecast section on my site, which includes a stock market outlook. As they say about pictures and thousands of words:

http://users.zoominternet.net/~fwuthering/FFF/SPX.png

[bart]

My $.02 worth:

http://www.nowandfutures.com/images/predict_dow.png



And for gold too:

http://www.nowandfutures.com/images/predict_gold.png

[Jim Nickerson]

I just put up a new forecast section on my site, which includes a stock market outlook. As they say about pictures and thousands of words:

http://users.zoominternet.net/~fwuthering/FFF/SPX.png

Finster,

Today I noted your projections on your site as above; nevertheless, what events, circumstances make you project that the SPX is headed up? I was hoping you would jump in with some fundamental reasons, though it takes more of your time I'd rather read some reasons vs. seeing a picture which to me is just a picture. Same for Bart.

[Jim Nickerson]

http://business.timesonline.co.uk/article/0,,8210-2352353,00.html (http://<a href=)



First, as Steven Wieting, of Citigroup notes, it is worth remembering that the US housing slowdown is not really a new development. Sales of homes have been falling for well over a year, while investment in residential building has dropped for three quarters in a row, and the peak in US house price inflation was roughly a year ago. Throughout these trends, the American economy has proved resilient. This offers some reassurance.
Secondly, Mr Wieting also highlights the reality that probably only a small part of the money borrowed by Americans against their homes has actually been spent — mirroring the pattern seen in British “mortgage equity withdrawal” (MEW), according to the Bank of England.
Indeed, Citigroup calculates that US real consumer spending would have risen by a scorching 11 per cent over the past year if all of the funds extracted through US MEW had been spent — rather than the more modest actual figure of 3 per cent.
Finally, there are also question marks over the additional fear that many American borrowers will be hit hard by sharp rises in their interest payments when fixed-rate deals put in place in 2003 run out. Citigroup estimates that only 5 per cent of US mortgages taken out at the trough in US interest rates in 2003 should be affected: a relatively small cadre of homeowners.
So while there is no question that the US housing market downturn is severe, and will have serious economic consequences, it ought not to prove quite the cataclysm that the most pessimistic doom-mongers suggest. My own bet is that the American economy will safely escape recession, even though the blight of persistent inflation will limit the Fed’s scope to make early interest rate cuts to underpin activity. One important supporting factor will be that weakening US prospects, and the likelihood of eventual cuts in rates, should push the dollar still lower, boosting American export trade. Another will be the relatively robust health of the US corporate sector, which has reaped the benefits of a protracted profits boom.

Perhaps these are some possibilities of why the majority Bears may be wrong.

[bart]

Finster,

Today I noted your projections on your site as above; nevertheless, what events, circumstances make you project that the SPX is headed up? I was hoping you would jump in with some fundamental reasons, though it takes more of your time I'd rather read some reasons vs. seeing a picture which to me is just a picture. Same for Bart.

Mine are basically based on changes on various Fed stats (like repos), interest rates, CPI and a few other items with appropriate lags.

There's slightly more detail on my FAQ page but the actual formula is both proprietary and is also tweaked now & then. The current charts are based on a very different algorithm I developed about two weeks ago.

[Finster]

Finster,

Today I noted your projections on your site as above; nevertheless, what events, circumstances make you project that the SPX is headed up? I was hoping you would jump in with some fundamental reasons, though it takes more of your time I'd rather read some reasons vs. seeing a picture which to me is just a picture. Same for Bart.

That's the hard part, Jim. If asked to list and weigh bearish and bullish factors, my qualitative assessment would come down on the bearish side. The chart you see is the result of a quantative computer analysis. The inputs are time series covering various interest rates and asset prices. The computer model constructs a series of forecasts. It then compares the results of prior forecasts with what actually happened, and adjusts itself accordingly. It, so to speak, learns from experience.

The obvious drawback of such a quantitative model is that while it can tell you exactly what it thinks will happen, it can't tell you why...