Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Mr. Trump: You May Not Want To Take Credit For The Stock Market Just Yet

Stock-Markets / Stock Market 2017 Jul 26, 2017 - 05:18 PM GMT

By: Avi_Gilburt

Stock-Markets

Stock market is still bullish

If you have followed my analysis through the years, you would know that I have correctly been steadfastly bullish the stock market for quite some time. In fact, I was one of the very few who expected the market to rocket higher even after Donald Trump won the election last year.

And, now, we are approaching the S&P 500 target in the 2500SPX region we expected to strike in 2017. However, just because the market has rallied strongly after the election as we expected, it does not mean we expect it to continue into the next election season. And, let me explain why that is so important.


“It’s the economy, stupid”

James Carville, one of President Clinton’s campaign strategists, coined a term years ago which has been considered the most important factor for an incumbent President being able to win re-election:

“It’s the economy, stupid.”

But, based upon a 2012 paper written by Prechter, Goel, Parker and Lampert, which analyzed Presidential elections from 1789-2008, they determined that factors such as GDP, unemployment, inflation, etc., are not significant predictors of the outcome of an incumbent’s re-election bid. Rather, it is the direction of the stock market in the year to three years before the re-election bid which is the best predictor of success for the incumbent:

Generally, incumbents who preside over a net advance in the stock market tend to obtain a higher vote margin than incumbents who preside over a net decline in the stock market in the one, two, three and four years before the election. Of all the variations we test, the relationship between the three-year net percentage change in the DJIA and the incumbent’s popular vote margin is the strongest and achieves the highest level of significance. Large stock market advances during the final three years of incumbent candidates’ terms tend to be strongly associated with subsequent landslide victories, as opposed to landslide defeats, for incumbents in their re-election bids. Conversely, large stock market declines during the final three years of incumbent candidates’ terms tend to be strongly associated with subsequent landslide defeats, as opposed to landslide victories, for incumbents in their re-election bids.

https://papers.ssrn.com/sol3/Papers.cfm?abstract_id=1987160

So, rather than it being the economy, it is probably more accurate to adjust Mr. Carville’s perspective to “It’s the stock market, stupid.”

Now that history has shown us what is the best predictor for an incumbent winning re-election, let’s review our expectations for the stock market to see if we can glean something from the expected timing of the stock market’s movement relative to the next Presidential election cycle.

Looking forward

As I noted at the end of 2015 and early 2016, I expected the market to set up a strong rally from the 1800 region in the S&P500 towards a long-term target in the 2537-2611SPX region. And, we are now finally approaching that target region, as the market has been adhering quite well to the sentiment patterns we have been tracking for years. However, just because we are approaching the bottom of that target region does not mean that I expect the market to top out right now for years to come.

While I am expecting the market to strike a top within the next several weeks, I believe that top will only provide us a short-term pullback, likely into the fall of 2017. I still believe we have more to see in this bull market going into 2018.

However, once we move into 2018, this is where it is going to get quite tricky. You see, I believe we will likely strike a significant market top in 2018, and that will likely occur no matter what is going on in the political arena. My expectation is that such a market top will likely usher in a 15-20% correction in the stock market.

The question will then be how long this correction will last. Within the Elliott Wave construct, we have a rule of alternation that suggests that when a 2nd wave of a certain degree is a sharp and fast correction, you should expect the 4th wave to be a slow grinding type of correction. Since the 2nd wave of our structure from the 2009 lows was only a 3-month event, it is certainly possible that the 4th wave may morph into a triangle pattern which can take us a year or two. And, being mired in a sideways stock market grind is not what an incumbent President is going to want to see to help his re-election bid.

However, as you can see in my attached chart, if the market is able to maintain the trend channel we have created since the 2009 bottom, it would seem we can still complete the 4th wave correction by the end of 2019, even if it does develop as a triangle.

Now that I have likely bored you with the technical work that I do, let’s get to the meat of the issue. It is becoming likely that the market is going to revisit the region from which we began to rally at the time of the 2016 election and it seems likely we will strike that region by 2019. So, this “should” leave us enough time for the market to be able to rally for a year into the 2020 election. Based upon the historical evidence, as identified by Prechter, et al, it would suggest that Mr. Trump should win his re-election bid for a 2nd term.

But, the question his communications team would want to consider today is whether they want to take ownership of the stock market action when it is looking likely that the market will experience a sizeable correction beginning next year (based upon the patterns the market has been following for years). From this analysts’ perspective, it may be best to wait until 2020 before they want to ride the coat tails of the stock market.

See charts illustrating the wave counts on the S&P 500.

No holdings.

Avi Gilburt is a widely followed Elliott Wave technical analyst and author of ElliottWaveTrader.net (www.elliottwavetrader.net), a live Trading Room featuring his intraday market analysis (including emini S&P 500, metals, oil, USD & VXX), interactive member-analyst forum, and detailed library of Elliott Wave education.

© 2017 Copyright Avi Gilburt - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in