Friday, April 15, 2016

stock market update

So far the rally off of the February low points has been the strongest since the rally off of the 2011 low points. Evidence for this can bee seen in the bottom two charts which show that two of my longer term market oscillators have risen above any level since that time. I like to call such events "kickoffs" because typically they mean that the rally is only the first phase of  a much bigger up move. As noted in my last stock market update sentiment at the February 2016 low point was the most bearish since the 2009 low and this is another reason for thinking we are seeing a classic "kickoff" rally.

I think the US stock market will soon rise above its 2015 high points. Note that the New York Stock Exchange advance-decline line has already done so. The rally off of the 2011 low points doubled the S&P 500 index during the subsequent 3 1/2 years. So I think a 50% rally off the the February 2016 low in the S&P 500 over two years is a reasonable projection. An upward swing that big would bring the S&P 500 to 2700.

Of course every extended stock market swing is interrupted by substantial but temporary moves in the opposite direction. In this case I don't think there will any danger of a big drop in the US stock market, say one of between s5% and 10%, until the 5 day moving average of the put-call ratio drops to levels comparable to those seen near the 2015 high points.

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