Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Bitcoin Price Wavers - 15th Jan 19
History Shows That “Disruptor Stocks” Will Make You the Most Money in a Bear Market - 15th Jan 19
What Will the Stock Market Do Around Earnings Season - 15th Jan 19
2018-2019 Pop Goes The Debt Bubble - 15th Jan 19
Are Global Stock Markets About To Rally 10 Percent? - 15th Jan 19
Here's something to make you money in 2019 - 15th Jan 19
Theresa May to Lose by Over 200 Votes as Remain MP's Plot Subverting Brexit - 15th Jan 19
Europe is Burning - 14th Jan 19
S&P 500 Bounces Off 2,600, Downward Reversal? - 14th Jan 19
Gold A Rally or a Bull Market? - 14th Jan 19
Gold Stocks, Dollar and Oil Cycle Moves to Profit from in 2019 - 14th Jan 19
How To Profit From The Death Of Las Vegas - 14th Jan 19
Real Reason for Land Rover Crisis is Poor Quality of Build - 14th Jan 19
Stock Market Looking Toppy! - 13th Jan 19
Liquidity, Money Supply, and Insolvency - 13th Jan 19
Top Ten Trends Lead to Gold Price - 13th Jan 19
Silver: A Long Term Perspective - 13th Jan 19
Trump's Impeachment? Watch the Stock Market - 12th Jan 19
Big Silver Move Foreshadowed as Industrial Panic Looms - 12th Jan 19
Gold GDXJ Upside Bests GDX - 12th Jan 19
Devastating Investment Losses Are Coming: What Is Your Advisor Doing About It? - 12th Jan 19
Things to do Before Choosing the Right Credit Card - 12th Jan 19
Japanese Yen Outlook In 2019 - 11th Jan 19
Yield curve suggests that US Recession is near: Trading Setups - 11th Jan 19
How Unrealistic Return Assumptions Are Ruining Your Stocks Portfolio - 10th Jan 19
What’s Next for the US Dollar, Gold, Stocks & Bonds? - 10th Jan 19
America's New Africa Strategy - 10th Jan 19
Gold Mine Production by Country - 10th Jan 19
Gold, Stocks and the Flattening Yield Curve - 10th Jan 19
Silver Price Trend Forecast Target for 2019 - 10th Jan 19
Silver Price Trend Forecast 2019 - 9th Jan 19
Did Strong December Payrolls Push Gold Prices Up? - 8th Jan 19
How to Spot A Tradable Stock Market Top? - 8th Jan 19
Why 90% of Traders Lose - 8th Jan 19
Breadth is Very Strong While Stocks are Surging. What’s Next for Stocks - 8th Jan 19
Half of Investment-Grade Bonds Are Just One Step from Junk Status - 7th Jan 19
Stocks Rallied Again, Still Just an Upward Correction? - 7th Jan 19
Gold Golden Long-Term Opportunity - 7th Jan 19

Market Oracle FREE Newsletter

Bitcoin Analysis and Trend Forecast 2019

What Happens Next when the Stock Market Consolidates in a Very Narrow Range

Stock-Markets / Stock Markets 2018 May 30, 2018 - 02:15 PM GMT

By: Troy_Bombardia

Stock-Markets

The U.S. stock market (S&P 500) has been swinging in a very narrow range over the past 12 days. The range is less than 1% when using CLOSE prices.


Oddstats did a study demonstrating what happens next when the S&P 500 swings sideways in a very narrow range for 12 days. He failed to put things into context, which caused him to overestimate how bullish his study was.

My study will correct the error that he made by adding context.

*Putting things into context is very important. The same indicator/study can result in different conclusions when market stages are different.

As you can see, a market that consolidates sideways is a short term, medium term, AND long term bullish sign (according to Oddstats’ study). But this fails to recognize that there is a fundamental difference between:

  1. A market that consolidates sideways when it’s making all time highs (i.e. grinding higher), and..
  2. A market that consolidates sideways when it’s still far from making new highs.

Studies that have no context aren’t very useful for trading the future. A market that consolidates sideways when it’s making new highs will naturally have a higher change of going higher in the future. “Grind higher” patterns are inherently bullish for the stock market. Stock market tops and downtrends are marked by increased volatility.

The stock market today fits the 2nd context: a market that consolidates sideways when it’s still far from making new highs. The S&P 500 is still more than 5% below its all time high. It’s uncommon for the stock market’s volatility to be this low when it hasn’t made a new high. The market usually experiences higher than normal volatility when it hasn’t made a new high.

That’s why I changed the parameters for Oddstats’ study. My study looks at what happens next when:

The S&P 500 closed in a 1% range over the past 12 days, AND…

The S&P 500 is at least 3% below its all time high

Here are the study’s results. Notice that the short term, medium term, and long term all go from being decidedly bullish (in Oddstats’ study) to being less bullish (in my study).

Here’s the Excel file for this study. Data and equations are included.

Conclusion

My study demonstrates that the stock market’s short term, medium term, and long term have a slight bullish bias. This study is not an extremely bullish sign for the stock market.

In the meantime, the Medium-Long Term Model and 6 other trading models are bullish on the stock market right now. This TIME cycle study demonstrates that the stock market will probably make a new high before summer 2018 is over.

By Troy Bombardia

BullMarkets.co

I’m Troy Bombardia, the author behind BullMarkets.co. I used to run a hedge fund, but closed it due to a major health scare. I am now enjoying life and simply investing/trading my own account. I focus on long term performance and ignore short term performance.

Copyright 2018 © Troy Bombardia - 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.

Troy_Bombardia Archive

© 2005-2018 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