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
#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.”