Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Gold and Silver The Die Is Cast - 27th Feb 20
US Economy Permanently Addicted to Zero Interest Rates - 27th Feb 20
Has the Stock Market Waterfall Event Started Or A Buying Opportunity? - 27th Feb 20
Advantages of Enrolling in a Retirement Plan - 27th Feb 20 - LS
South Korea Coronavirus Outbreak Data Analysis Warning Rate of Infection is Exponential! - 26th Feb 20
Gold Price Long-term Trend Analysis Forecast 2020 - 26th Feb 20
Fake Markets Are on Collision Course with Reality - 26th Feb 20
Microsoft is Crushing the S&P 500, Secret Trait Of Stocks That Soar 1,000%+ - 26th Feb 20
Europe's Best Ski Resorts For The Ultimate Adventure - 26th Feb 20
Samsung Galaxy S20+ vs Galaxy S10+ Which One to Buy? - 26th Feb 20
Gold Is Taking on $1,700 amid Rising Coronavirus Fears - 26th Feb 20
Is This What Falling Through the Floor Looks Like in Stocks? - 26th Feb 20
Gold Minsky Moment Coming - 26th Feb 20
Why Every Student Should Study Economics - 26th Feb 20
Stock Market Correction Over? - 26th Feb 20
US Bond Market Yield Curve Patterns – What To Expect In 2020 - 25th Feb 20
Has Stock Market Waterfall Event Started Or A Buying Opportunity? - 25th Feb 20
Coronavirus IN Sheffield! Royal Hallamshire Hospital treating 2 infected Patients, UK - 25th Feb 20
Dow Short-term Trend Analysis - Coronavirus Trigger a Stocks Bear Market? - 24th Feb 20
Sustained Silver Rally Coming? - 24th Feb 20
Should Investors Worry about Repo Market and Buy Gold? - 24th Feb 20
Are FANG Technology Stocks Setting Up For A Market Crash? - 24th Feb 20
Gold Above $1,600 Amid FOMC Minutes and Coronavirus Impact - 24th Feb 20
CoronaVirus Pandemic Day 76 Trend Forecast Update - Infected 540k, Minus China 1715, Deaths 4920 - 23rd Feb 20 -
Ways to Find Startup Capital - 23rd Feb 20
Stock Market Deviation from Overall Outlook for 2020 - 22nd Feb 20
The Shanghai Composite and Coronavirus: A Revealing Perspective - 22nd Feb 20
Baltic Dry, Copper, Oil, Tech and China Continue Call for Stock Market Crash Soon - 22nd Feb 20
Gold Warning – This is Not a Buying Opportunity - 22nd Feb 20
Is The Technology Sector FANG Stocks Setting Up For A Market Crash? - 22nd Feb 20
Coronavirus China Infection Statistics Analysis, Probability Forecasts 1/2 Million Infected - 21st Feb 20
Is Crude Oil Firmly on the Upswing Now? - 20th Feb 20
What Can Stop the Stocks Bull – Or At Least, Make It Pause? - 20th Feb 20
Trump and Economic News That Drive Gold, Not Just Coronavirus - 20th Feb 20
Coronavirus COVID19 UK Infection Prevention, Boosting Immune Systems, Birmingham, Sheffield - 20th Feb 20
Silver’s Valuable Insights Into the Upcoming PMs Rally - 20th Feb 20
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From Overclockers.co.uk - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

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

6 Critical Money Making Rules