Trumps losses become Bernie Sanders’ gains. What will a socialist government do to stocks?
Flat/sideways for 8-10 years:
But I see the future more like Japan with low growth. There’s no way you’ll have economic growth like 1950s America.
Let’s see Japan…grinding lower and lower but with low income taxes! Higher taxes will lead to a worse picture.
Line must start to rise before correction events:
Sep-Oct 2014
Jan 2015
August 2015
Jan 2016
Since Mar 2016 it’s been down BUT now is rising setting up conditions for correction Sep-Oct 2017.
The risk off stocks line is also getting ready to rise!
OFC model: oil must X 40 wkma first and that occurs in July…
The oil 40 wkma is now flat.
When there’s a correction in Sep-Oct, Jan follows:
Sep-Oct 2013 followed by Jan-Feb 2014 (small due to QE)
Sep-Oct 2014 followed by Jan 2015 (larger but Fed rate 0)
Aug 2015 followed by Jan -Feb 2016 (biggest correction yet as Fed rate rose in Dec, volatility increases as Fed rate rises provided Oil is below the line)
Sep-Oct 2016 NO correction and then Jan 2017 NO correction as oil above the 40wkma
Next: Sep-Oct 2017 followed by Jan-Feb 2018 (big also due to Fed rate rises)
TLT to SPY 10 week line should show rise
Tremor 1 (-2 to -4%) underway after Oil X 40 wkma and FPC as predicted! Cycle is now 1 year from Mar 2017 to mid Feb 2018 risk off.
Tremor 2 will be Jun-Jul again -2 to 4%. But no FPC in Jun as Fed wants to rise 3 times this year. Jun-Jul is not chosen for FPC as summer holidays interfere.
Then the correction (-10%) Sep to Oct after Sep Fed Meeting. Why Sep?
Fed policy changes in Sep most of the time:
Sep 2007 Fed dropped rates first time in 4 years.
Sep 2010 QE starts
Sep 2011 Twist
Sep 2012 QE on MBS
Sep-Oct 2013 Debt Limit Crisis
Sep-Oct 2014 After holidays correction…taper all year
Sep 2015 (not to be china Aug crash)
and Sep 2016 risk on…oil rising so no chance for correction.
Just as oil can be used on the downside to ‘see’ the next correction (-10%), it can also be used to jump on the SPY rebound train.
Below oil rises rapidly From Feb 16-Mar 1. +$7 in 2 weeks!
And SPY continues to rise after its 10% correction in Jan. Play would be Mar 1- 18.
The idea here is the staircase up. The market will tend to rise and rise until 2020 therefore rebounding the 2nd month after a fall. The indicator is the oil price. It appears that oil has some sort of bottom when the buyers return and the staircase up continues for SPY. Oil may have a lower downside resistance now perhaps $20? This implies a shorter risk/on off cycle now perhaps 1 year instead of 18 months. With the Fed raising rates…market time will accelerate and is expected.
Transition to risk on clear on Feb 23!
US Home Ownership Falls 5%…the most in 50 years
And UK 9.8%..
These are bad news for real estate and household formation/economic growth.
Recessions occur in election years as market looks for a bailout. Until the election…the staircase up continues.
Good depiction here….SPY
The issue after the next election and collapse in Sep-Oct 2020 will be how high taxes? Will it kill volatility?
To consider…
http://fortune.com/2016/02/17/bernie-sanders-taxes-2/
For his proposal, Sanders relies on analysis prepared for the Robin Hood Tax Coalition by economists Robert Pollin and James Heintz. They assume that if the United States were to tax stock sales at 0.5%, bond sales at 0.1%, and derivative sales at .005%, it would reduce trading volumes by 50% and raise $352 billion per year. Sanders wants to use some of this money to fund a program to provide free public education for college students, which the campaign estimates would cost the federal government $47 billion per year, with the remaining $23 billion of the cost covered by state governments.
Other analysts are not so optimistic about the revenue-raising possibilities of the plan. A recent analysis of various financial transaction taxes by the Tax Policy Center found that a well-designed FTT could bring in about $75 billion per year, still probably enough to pay for Sanders’ public education proposal, but not nearly as much as the Vermont Senator hopes.
Could Bernie have won?
“The national survey of more than 1,600 registered voters, conducted by Gravis Marketing two days before the general election, found that Sanders would have received 56 percent of the vote while Trump would have won 44 percent. The poll was commissioned and financed by outgoing Florida Congressman Alan Grayson, a Democrat who endorsed Sanders in the presidential primary.
The last election result that decisive was Ronald Reagan’s victory over Democrat Walter Mondale in 1984.
Crucially, independent voters, who made up nearly one-third of the general election voters this year, favored Sanders over Trump, 55 percent to 45 percent, the poll found. Hillary Clinton, by contrast, lost independents 48 percent to 42 percent, according to exitpolls.”
A mixed bag in 2020 with bailouts from Ryan and Trump in October BUT an incoming Bernie-like president with high taxes. If financial activity is reduced 50%, GDP could contract by 10% as 21% of GDP is now finance related. Contrary to popular opinion the 1% can be sacrificed for political gain.
July will be similar to 2014 in that oil will become a bear market again. BUT as July 2014 had a -2.5% fall, this July will have a similar pullback but no correction. Expect another pullback 2-4% in Apr-May. The two pullbacks indicate the Sep-Oct 10% correction. Correction occurs from Sep 1-mid Oct. Look for VIX 15 to start.
Credit Flow Investor 