With a net yearly decline of -14.9pts (0.7%) to sp'2043, the market has seen the broad climb from 2009 stall. Could the rally resume into the spring, or will continuing commodity weakness cause increasing downward momentum for the US and other world equity markets?
Lets start with a brief look at a few of the key scenarios...
sp'monthly6 - scenarios
Summary
A - looks highly unlikely. Most world equity markets closed the year significantly lower, with bearish price structure.
B - its possible the market could continue to climb, but it seems overly difficult if Oil loses the $30 threshold.. along with other aspects of commodity deflation.
C - a washout into the summer, with renewed upside into year end, seems very reasonable.
Considering how terrified the central banks are about falling equity prices, increased QE from the ECB and BoJ seems a given. If the sp'500 falls into the 1600/1500s, I'd imagine the US Fed would launch QE4.
D - A sustained break under sp'1500 looks highly difficult, not least as central banks will be ready with helicopters.
A monthly close <1500 should sound CRASH alarm bells in all traders. First target would then be the 1100/1000 zone.
So... with that in mind... what is my guess?
sp'weekly8c
I'm going with scenario C.
I am seeking the 1600/1550 zone, no later than June/July, with a high probability of QE4 being launched. If Yellen does decide to spool the printers back up, hyper-recovery into end 2016 looks likely.
Assuming 1600 in June/July, it would be a tough battle to claw back above the 2000 threshold, but I'd imagine many would buy everything they could. That might just be enough to close the year moderately net higher, with some indexes (most likely... Dow, sp'500, and Nasdaq) breaking new historic highs.
Best guess for end 2016: sp'2185
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Other notable predictions...
Oil to fall <$30 by late spring. From a pure chart perspective, next support is the Feb' 2009 low of $33.55. After that, its the 26/25 zone. Sustained price action <$20 looks extremely difficult.
Geo-political: there will clearly be high threat of sporadic 'terror attacks'.
Turkey/Russia remains a cauldron of disquiet. However, the real wild card remains Saudi Arabia. Tensions are again rising as the House of Saud are battling to keep a tight reign on any political opposition.
Any civil unrest or foreign incursions into SA would send Oil way past $50. For now, it remains one of those very unlikely, but wild card risks that those naked short Oil should be mindful of.
Gold: $900/875. If correct, Silver would likely be in the 12/11s. Copper $1.75/50.
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Economic: the US could see Q4 GDP negative (based on Dec' PMI of 42). If the equity market does implode into summer 2016, there is a risk of a second negative quarter... bringing the US into an official (if moderate) recession.
Any such recession would give an excuse to the US Federal reserve...
1. stall any further rate hikes. Whether they'd hold rates at 25/50bps range, or cut back to 0-25bps... difficult to say.
2. If sp'1600s... it would seem highly likely QE4 would be initiated, probably on the order of at least 600/700bn.. with a min' duration to summer 2017.
US t-bonds would be an obvious purchase, but perhaps the Fed would be interested in buying up some of that student debt, for the 'good of the nation'... or some other such excuse.
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sp'monthly3b - 10MA, red candles
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| A red candle to start the year |
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Your targets
End 2016 – sp'500
Target, display name, comments
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1475, TDD
1500, SPX- 2145, Charts suggest we entered a Bear on May/20th,
2015. We had a 12% decline for either an INT or Major W-A on August
/24,2015. A strong Bounce for INT or Major W-B ending on
November/3rd.
Now, this corrective wave is leading us to a strong and violent
decline at the very beginning of 2016. IMO will see the bottom of
this Bear Market possibly by October-November at the levels of
1200-1370 ending the year 2016 with the first stages of a new Bull
Market around the 1500 area.
1600, Eddy_112, 1700 early in the year .. then a bounce and a
lower low.(crash??) Finally another bounce that may take us till end
of year. I expect a bear market and high volatility. Difficult to say
how things will end the year.
1650, Doug, I'm guessing a S&P 500 Q1 closing low of 1850 (a
near revisit of Aug '16 low), a bounce, an annual low of 1450 (down
~30%) probably in the late summer or autumn and a year-end close of
1650 (down ~20%). The basis of this guess is something like the
following: recession in the US and world, multiple countries
defaulting on their foreign debt, a big devaluation in China, one or
two failed commodity trading houses, several serious terror attacks
and no QE but a rate cut back to 0-0.25 Fed Funds rate. If we face
another banking crisis with one or more large banks seeking emergency
loans, then I'm probably optimistic and will end the year down 40%.
1680 GreedyKojiro - year's high: 2090 and year's low: 1570
1740, Bill, The market has topped in May 2015 at 2,134.72 . It's
all downhill from here. The question is not whether the market will
be down in 2016 but by how much. My best guess is for a 15 % drop of
300 points down to 1740. I guess my reasoning is that I see the
market getting progressively worse after each subsequent interest
rate rise. But I do not see the market hitting bottom until 2018 or
maybe as late as 2019.
Another reason for my 1740 year end target is a Donald Trump
victory in the US election which means no more bullshit or corporate
welfare for Wall Street. Subsidies via low interest rates and QE are
gone for good with a Donald Trump victory. With regard to oil and
gold, I expect the decline to continue. Oil should break below $30 a
barrel and trade in the 20s. Gold will decisively break below a $1000
an ounce and trade in the 900s comfortably.
1776.03, Stormchaser80
1825, Greenlander
1850, 200ma, The thought of QE4 has entered my train of thought as
well as that of the Fed trying to take back the rate hike. I just
don't see it happening in an election year. I am thinking we retest
the February 2014 low by March. From there I wouldn't write off a
possible higher high for targets sought in 2015 (2150,2173, and 2214
with an extreme nearer 2250). Year end closes around the December
2013 highs near 1850 if I can remain optimistic.
1870, G-Force
1899, hemivette, Defaults defaults defaults :)
1900, Frank Rizzo, Hola guys. I think the decline will be swift
and heavy in the first quarter with a couple of failed rallies to be
bottomed in the summer, maybe down 40% from today's close. That will
take the fed into action to either stop the rate increases or a small
round of QE in the fall. Then close the year at 1900.
1900, Marton Meszaros, In Q1 attempt at new highs will fail ,
followed by a pull back in Q2, followed by a collapse in Q3 down to
1550, support at the previous two cycle tops from 1999, 2007. Then
QE4 will be launched and S&P will be propelled back to 1900.
1900, WavRider, intra low of 1790
1940, atraderfx, Thinking about the Olympics and the Summer flat
spot that may create - my final call is a Finish 1940. I expect
Yellen to help out the democrats to win US election and recover the
market from heavy losses into year end.
1964.27, brelsa, YEAR HIGH: 2156.88 , YEAR LOW: 1822.29
2079.50, sutluc
2150, Binkius, My guess is that it all depends where QE4/RRR-0
dumps us all.
I'm thinking the route will be SP'2180/2200, then SP'1500, then
QE4/RRR-0, then SP'2200, then year end. Assuming that QE4/RRR-0
stimulus will still be pumping strong at the end of 2016
2165, Brian Goldman, by April we should be down near 1700 or into
1700s...so by end of year we should have ATHs as the CBs will come
back with some plan to pump it up prior to or just after the
election. So 2150-2180.
2185, Permabear Doomster
2200, Benjamin
2275, VTrader
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China, monthly
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| Price structure is a big bear flag |
Hopeful that 2016 will be an exciting and dynamic year.
More than anything, I am hopeful we'll see a much more dynamic year for equities than the rather frustrating moderate chop of 2015. Certainly, today bodes well for those traders seeking higher volatility.
We know the central banks will fight like hell to prevent another global equity crash, so I'm not expecting a break <sp'1500 again... as in 'ever again'. Besides, there is always the issue of 'would you rather have a low/negative yield govt' bond, or some AAPL stock?'.Maybe the market could even manage to rally without QE4, but I'd be surprised if the Fed resisted.
Despite the current bearish outlook, adapting to whatever happens in the weeks and months ahead will be critically important.
Goodnight from London
