Better Late Than Never

Better Late Than Never

Santa Can Still Arrive for US Equities Into Year-End.

There is a growing probability of a significant rally in U.S. equities into year-end. The obvious fulcrum for a directional move is this afternoon’s Fed interest rate announcement, and a surprise could emerge to move equities significantly one way or the other.

My models operate in the context of probabilities and prices, not predictions, so we offer this assessment with caveats. On every short and medium-term timeframe, my complexity science-based models suggest the possibility of a turning point in equities. On longer-term timeframes, the models have maintained a long position, despite the recent drop in prices. This longer-term positioning is in line with my November 2nd blog post, “Price, Not Prediction, Remains Paramount”.

Previous posts have shown the relationship between the macro environment in 1998 and 2015. The general pattern has held up in Q4. In both years, equities bounced strongly off August/September lows. In both cases, they dipped the first half of November and the first half of December. In 1998, the week of 12/14 and 12/28 saw a significant rally to new all-time highs. Many would scoff at the notion of new highs, given the poor performance of equities through the first 350 days of this year. I, however, do not rule out the possibility, despite there being only 12 trading days remaining in 2015.

S&P 500 in 1998 and 2015

As always, I will react to price movements as they occur. In the case of the remainder of the year, other asset classes are expected to be quite active as well, including currencies and treasuries.

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Any opinions or forecasts contained herein reflect the subjective judgments and assumptions of the author only. There can be no assurance that developments will transpire as forecasted and actual results will be different. Accuracy of data is not guaranteed but represents the author’s best judgment and can be derived from a variety of sources. The information is subject to change at any time without notice.