Thursday, November 21, 2013

Merrill Says 4 Years To S&P 2300

Who knows?
I'm still trying to figure out where I'm going for dinner much less call a market four years out.
The picture is nice, for some reason it reminds me of daVinci's Vitruvian Man with the proportions and lines and stuff.

From Ritholtz@Bloomberg:

S&P 2300? Give It Four Years: Ritholtz Chart
Source: Bank of America Merrill Lynch
Source: Bank of America Merrill Lynch
It took more than 13 years, but the S&P 500 managed to eclipse its 2007 high of 1576 earlier this year. This move takes it out of a long term trading range, and according to the Technical Analysts at Bank of America Merrill Lynch, marks a transition to a new secular bull market.

Some folks might disagree with that characterization. The arguments against are that one cannot tell for sure (and certainly not this soon) after new highs if they are false breakouts or not; they may not stick if earnings fall or rates rise. Further, given the Fed’s role in driving stock prices, once The Taper begins, all bets are off as to whether we stay in the new trading range above SPX 1576.

Note that the false breakout was hellish for traders in the 1970s. The 1973-74 Pop & Drop suckered plenty of traders into what looked like a major breakout, only to collapse more than 50 percent from the highs. The 1979-80 period also saw a similar false breakout, before the next secular bull market began in 1982. J.C. Parets, the chartered market technician of All Star Charts and founder of Eagle Bay Capital notes that the 1980 false breakout ran 15 percent before falling 27 percent to the final cyclical low. At present, we are 10 percent above the trading range breakout....MORE