3 Reasons to be Bullish on 2016 (and 2 Reasons to be Scared as Hell)

  • SumoMe

As I wrote about here and here, at any and all given points in time it is possible to make a plausible bullish case and a plausible bearish case.  This is just as true now as it was, well, last week.

3 Reasons to Expect a Bullish 2016

#1. The JK HiLo Index

For the first reason I simply refer you to the article I wrote last week that included a discussion of my own JK HiLo Index.  As I wrote then, that index recently fell to an extremely low (i.e. bullish) level.  It should be noted that in 2008 this indicator gave a bullish signal well before the market ultimately reached its low.  So this is no “sure thing” by any means.  But it does tell us that the stock market did reach a “washed out” level early in 2016.

#2. “Escape Velocity”

For this I refer you to a 2/25/16 MarketWatch article written by Simon Maierhofer.  In the article Maierhofer reveals a little known signal that generated a buy signal on 2/17/16.  The indicator has generated only 8 previous signals since 1970.

Some of the signals were followed by short-term declines however:

1) In all 8 instances the S&P 500 Index was higher 12 months later

2) The average 12-month gain after the signal was +20.82%.

Definitely worth a read.

#3. Last 7 Months of An Election Year

The stock market has showed a strong tendency to gain ground during the last seven months of a presidential election year.  I wrote about this on Page 197 of my book “Seasonal Stock Market Trends”.  For the record, using the Dow since 1900 the last 7 months of the presidential  election year was:

*”Up” 22 time

*”Down” 6 times

During 14 of the last 16 presidential election years the S&P 500 has gained ground during the last 7 month of the year.

This trend was also covered recently in expert detail by Jeffrey Hirsch of The Stock Trader’s Almanac.   He correctly noted that during 14 of the last 16 presidential election years the S&P 500 has gained ground during the last 7 month of the year.

One important caveat here: The last “loser” was 2008 and as you may recall it was pretty awful.  So this is clearly no “sure thing.”  Still, 14 out of 16 is statistically significant.  Just remember that a stop-loss is always a good idea.

2 Reasons to be Scared as Hell

#1. Ominous Signs spotted by one market expert

Thomas DeMark is a name known to many stock market followers.  This article details why he is expecting potential trouble in the month of March.

#2. As always – China

A lot of analysts have been predicting anything from “trouble” to “Armageddon” based on the economic goings on in the country of China.  My personal opinion is that there is a painful day of reckoning “out there” somewhere the way. But in all candor I have no idea if that day is coming “sooner” or “later.”  But if you want to gain an understanding of the trouble that may be brewing in the Far East I suggest you read this article by David Stockman, which explains in great detail the dangers that are building.

Jay Kaeppel

 

One thought on “3 Reasons to be Bullish on 2016 (and 2 Reasons to be Scared as Hell)

  1. I really, really do want to believe in the “Escape Velocity” article, oh that would be so nice…..but I have to play devil’s advocate. First, the sample size is very small, only 8. Second, just because he’s seen eight years where this has worked out doesn’t mean there will be a ninth year. And finally, all other years had days that gained well over 1.5%, many in the 3-5% range, while 2016 couldn’t even crack 2%. Makes me wonder why he chose 1.5% as his threshold. Maybe that was the only way to get 2016 on the list. Had he chosen 1.75% or 2%, then this article wouldn’t even exist. ….. Keith

Leave a Reply

Your email address will not be published. Required fields are marked *

This blog is kept spam free by WP-SpamFree.