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TECHNICAL ANALYSIS


Welcome To The New Year

01/09/15 03:18:45 PM
by Koos van der Merwe

What can you expect to happen in the financial markets in 2015?

Security:   SPX
Position:   Buy

There are many analysts out there sending emails to all and sundry (I received three this morning) calling for a market crash in 2015. Fortunately, I cannot agree with them, and here is why.

Figure 1. The Kodratief Wave. The K-Wave is presently calling for a correction in 2016.
Graphic provided by: AdvancedGET.
 
The chart in Figure 1 is a chart of the S&P 500 index superimposed on the Kondratiev Wave. Notice how the K-Wave called for a correction in 1999 and the S&P only corrected in 2000. Also note that the K-Wave called for a correction in 2007 and the index corrected in May to December 2007. The index always corrects in the year the K-Wave calls for the correction, sometimes early, sometimes later in the year. This is because the unsophisticated investor always enters the market at the top. The K-Wave is presently calling for a correction in the year 2016, so should the correction pattern repeat itself, we could expect a correction sometime in 2016, not in 2015.

Figure 2. The S&P 500 Index With Presidential Cycle. We could expect a correction to occur sometime between June 2016 and December 2016.
Graphic provided by: AdvancedGET.
 
The chart in Figure 2 is a monthly chart of the S&P 500 index showing the Presidential cycle. If you study the chart you will notice that a correction in the index occurs six to three months before the end of a President's two-year term of office. With President Ronald Reagan notice the correction that took place in June 1988, which is not that obvious because of the market crash of August 1987. President Reagan's term of office ended December 1989. George HW Bush served only one term so there is no correction before his term of office expired. With President Bill Clinton, the correction took place in July 2000, five months before his term of office concluded. With President George W Bush, the market corrected in October 2007, two months before his term of office expired. This means that we could therefore expect a correction to occur some time between June 2016 and December 2016.

Figure 3. S&P 500 Index With Elliott Wave Count And Forecast. This monthly chart shows that there is still room for upside movement.
Graphic provided by: AdvancedGET.
 
Finally, the chart in Figure 3 is a monthly chart of the S&P 500 index with an Elliott wave count. The chart is suggesting that it could rise in a WAVE III to a price of 2144.78, a 1.50% rise of the length of WAVE I or 2228.53 a 1.618% rise of WAVE I. The correction, when it occurs, would be a WAVE IV correction, with a WAVE V and a major ABC correction still to come. The K-Wave in Figure 1, is calling for the minor correction sometime in the year 2016 and the major correction sometime in the year 2019.

So, after studying the charts, I must wish all readers a successful and happy 2015. Yes, there will be minor corrections along the way, but until June 2016 I am going to be bullish. Keep in mind though that the Kondratiev Wave is an economic wave whereas the S&P500 chart is a measure of the money and investment in the stock market. Although the S&P 500 is influenced by the economy, it is, as I wrote earlier, more influenced by unsophisticated investors buying at market tops.



Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

Address: 3256 West 24th Ave
Vancouver, BC
Phone # for sales: 6042634214
E-mail address: petroosp@gmail.com

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Date: 01/10/15Rank: 5Comment: 
Date: 01/14/15Rank: 5Comment: George Bush s term ended Dec 2008
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