Many have called this the most hated bull market in stocks of all time. And, until most people embrace it, this “hated” bull market will likely continue.
There are several sayings that support this perspective. Legendary investor John Templeton famously proclaimed in 1994 that “[b]ull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”
Zac Mannes, lead analyst of our Stockwaves service at Elliottwavetrader.net, recently posted the attached overlaid chart (see link, below) showing where we believe we are in the “market-optimism” continuum. It suggests that the stock market has a lot higher to go in 2017, as we are still nowhere near the “euphoria” that kills market rallies.
I also want to point out that a sizeable portion of our members at Elliottwavetrader.net are professional money managers. One of them posted the following in our Trading Room on Friday, which is a shared experience of a number of other money manager subscribers, as communicated to me over the past few weeks:
“I work for a major and leading brokerage firm here in the U.S. … I have answered a very large and unusual volume of emails/calls the last couple of weeks asking how to protect them from a massive correction/how to fade the Trump rally. The average retail investor is heavily entrenched in the mindset we are setting up for a huge pullback.”
So, despite consolidating just slightly below our all-time highs, it seems the so-called wall of worry is still alive and well. And, as long as we remain above our upper-support region shown on the attached 60-minute SP 500 Index
chart, one has to maintain a larger degree of bullish bias. This suggests your downside risk is about 50 points, whereas the upside potential in 2017 is over 250 points.
This perspective also is supported by some of our proprietary analysis. In “The Smart Money at EWT,” we use a collection of proprietary indicators that provide insight into how the “smart money,” or institutional money, is positioning themselves.
Based on these indicators, Princely Mathew, who runs the service (and is ranked No. 2 in the 2015 World Cup Championship of Futures Trading), expects a low in the 23-27th timeframe and a move higher into the beginning of January. After this rally, a pullback is likely to be seen until Jan. 10-11. This is supportive of the primary wave count, which is looking for wave iv of 3 to complete right now and v of 3 to begin. The correction afterward until Jan. 11 is likely a wave 4 pullback, all of which is depicted on the 60-minute chart as well.
When we came into 2016, we presented SP 500 charts that were targeting 2,300 for the year after a potential pullback into February of around 1,775-1,800.
As you can see from the attached review of our analysis over 2016, the market has been playing along pretty much as we have outlined it through the year. Therefore, we have no reason to expect the pattern to change, unless it tells us it wants to do so by breaking our upper support region. Until such time, our targets will remain between 2,537-2,610 in 2017 before we see a correction of at least 15% starting in 2018.