It’s been way too long since I made a fool of myself guessing the stock market. So here it goes…
Over the past 6 months we have seen US stock markets on a tear. S&P is up around 17% and DOW.. well I don’t really care much for DOW. How ironic that common investors (read you and me) are both highly optimistic and skeptic at the same time about this bull run. I have been trying to make sense of this to see if we can profit from it in some way. The big question is, will this run-up continue, is it long-term or more a short-term phenomenon? Is it just a byproduct of the monetary policy that Fed has undertaken since November ($85 billion bond buying per month)?
I am a big believer in technical indicators, but we have to be careful of reading long-term trends and short-term trends in the same fashion. It is important to first read long-term trends and then read short-term trends within that long-term trend.
As the guys on HLN say “My bold prediction is” S&P will go through a bull run the for the next 2 and half years ending at around 2200 to 2300 by December 2015 but in the short-term will fall to 1475-1525 by end of July 2013. I base these predictions mostly on technical indicators. The run up in the last 6 months is way contrary to previous run up, also there are no such strong economic indicators to support it.
I based my long-term prediction on the past few bull cycles, which have lasted 8 years from peak to peak. Typically the markets have taken 4 years to fall to the bottom and run up for 4 years after that. But in 2008 when the correction started, the market fell to its lowest point in just a year and half. But it did fall fully, so going by the 8 year cycle the bull market now will occupy the rest of the 6 and half years. We are 4 years into this which would mean another 2 and half years to run up.
Now let me go read my Markets – III post and cry a bit on how wrong I got it.
