Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

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