Short-term S&P 500 Outlook

Tunnel vision is almost always a risky approach to investing, however, this is one of those rare times where tunnel vision is actually the best way to go.

With tunnel vision I mean focusing on the (only) indicator that’s been working, and tuning out all other indicators.

Elliott Wave Theory (EWT) has been the indicator deserving of investors’ focus. EWT (interpreted correctly) has persistently pointed to higher prices.

Months before the Trump rally, EWT strongly suggested a S&P 500 rally into the mid 2,300s and higher (original price projection was published here: S&P 500 Update – Expect the Abnormal).

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Short-term Outlook

The December 14, 2016 Profit Radar Report expected a prolonged period of sideways trading, and after over a month of ‘go nowhere’ action, the January 29 Profit Radar Report stated that:

The sideways trading since Wednesday looks to be wave 4 with a possible down side target of 2,280 – 2,290 (open gap at 2,284.63). Based on the bearish divergences the S&P may peel lower, but based on EWT there’s a good chance the S&P will find support in the 2,280 – 2,290 range and rally into the low-mid 2,300s.”

We now know that EWT prevailed over bearish divergences and rallied into the EWT-based up side target mentioned in February 5 Profit Radar Report:

The S&P 500 moved above 2,290 on Friday. Measured EWT-based up side targets are in the 2,320 – 2,370 zone. Various bearish divergences (RSI-35, stocks above 50-day SMA) and near oversold condition still suggest some caution.”

No Can Do Tunnel Vision

To maintain a diversified research and forecasting approach, the Profit Radar Report looks at the most potent indicators and never relies solely on any one indicator.

Today’s push to new all-time highs erased (almost) all larger bearish divergences, and synchronizes EWT more with many other indicators (only cycles are short-term bearish).

The weight of evidence points to more strength ahead (2 steps forward, 1 step back, as outlined by the January 4 Profit Radar Report). Any pauses caused by overbought conditions or investors sentiment should be short-term in nature.

Next resistance (and chance for a pullback/pause) is around 2,342. Support is at 2,320, 2,300 and 2,285 (see chart).

At some point in 2017 however, we should see either a major market top or a 15% correction. More detail is available in the multiple-indicator based 2017 S&P 500 Forecast.

Popular S&P 500 ETFs include:

  • SPDR S&P 500 ETF (SPY)
  • iShares S&P 500 ETF (IVV)
  • Vanguard S&P 500 ETF (VOO)

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Advertisements

Wal-Mart of ETF Providers Offers Most Bang for The Buck

 

Wal-Mart is known for rigorous pricing, swallowing up market share and frustrating competition. The Wal-Mart of the ETF market place is going about business almost the same way, but this Wal-mart can’t offer everything.

The ETF market place offers many exotic choices, such as a Global Carbon ETF, Forensic Accounting ETF, and IPO ETF, but that’s not what makes ETFs attractive and efficient.

Yes, BMW may build an electric car, but their flagship product is the ultimate driving machine.

The flagship ETF product is a plain and simple index ETF. Who builds the best index ETF?

2013 Index ETF Inflows

Since 2010, Vanguards index ETF market share has grown from 15 to 20% while iShares (owned by BlackRock) and State Street bemoan small losses (datasource: Bloomberg).

In 2013 Vanguard ETFs grew by $51 billion, receiving 32 cents of every dollar invested.

Index ETF Fees

The average Vanguard ETF has an expense ratio of 0.14%, compared with 0.35% for State Street’s SPDRs and 0.39% for iShares’ ETFs.

This is not a true apples to apples fee comparison, as State Street and iShares offer some more specialized ETFs with higher fees.

What about the most popular S&P 500 ETF?

The bellwether SPDR S&P 500 ETF (NYSEArca: SPY) has an expense ratio of 0.11%. The iShares Core S&P 500 ETF (NYSEArca: IVV) comes in at 0.07%, while the Vanguard S&P 500 ETF (NYSEArca: VOO) has a price tag of 0.05%.

ETF Holdings

As per its patent, Vanguard is able to pool mutual fund and ETF assets and issue different shares (such as ETF).

As a result, Vanguard ETFs provide a more pure representation of the underlying index. On average, iShares ETF hold 312 securities, State Street ETFs 308, and Vanguard ETFs 1,171.

Unlike iShares and BlackRock, Vanguard is not a publicly traded company and doesn’t have to worry about pleasing Wall Street.

It All Doesn’t Matter, if …

… you buy at the wrong time.

Even if you have the best-in-class product, you will still lose money if you buy at the wrong time. Neither State Street, nor iShares or Vanguard will tell you when to buy (chances are any advisor will always tell you now is the best time to buy).

When is the right time to buy? Here are a few tips.

Buy Low, Sell High – How to Spot the Best S&P 500 Entry Points

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (stocks, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. We are accountable for our work, because we track every recommendation (see track record below).

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

S&P 500 Hits 2009 Projection Target – Resistance or Springboard?

The S&P 500 has finally reached its up side target outlined by a trend channel going all the way back to 2009. Is this the bull market’s final destination or just a ‘layover’ before departing for new bull market highs?

The S&P 500 (SNP: ^GSPC) has rallied 100 points in the last 10 days.

That’s nice trivia, but the weekly S&P 500 bar chart (figure 2) shows something more significant.

The S&P 500 (NYSEArca: SPY) has finally reached trend channel resistance going all the way back to the March 2009 low.

This trend channel served as a natural magnet for prices, that’s why the Profit Radar Report has been following the channel since early 2013.

The July 14, Profit Radar Report featured two possible paths the S&P 500 could take to ultimately reach the channel.

  1. “A brief correction followed by the next rally leg to 1,700 – 1,750 (purple projections). Somehow my gut tells me it won’t be that easy.”
  2. “A prolonged period (4 – 8 weeks) of frustrating and unpredictable range bound up and down moves (blue projections) may be the markets way to play cat and mouse with investors and digest the strong gains since November 2012 and June 24, 2013. The longer the sideways action, the higher the next target (due to the ascending trend channel).”

The S&P 500 (NYSEArca: IVV) chose option #2, the cat and mouse path. But regardless of the path, the destination has been reached. What now?

Mission Accomplished

The S&P 500 has captured the long-standing Profit Radar Report’s up side target and accomplished this mission.

As the chart shows, the upper line of the trend channel has acted as natural resistance for the S&P 500 (NYSEArca: VOO) in the past and repelled stocks.

But past performance is no guarantee of future results.

If the S&P 500 is going to reverse, it should do so right around trend channel resistance. In fact, the effect of the channel resistance is being felt today.

However, I am seeing a number of indicators that suggest any reversal will be only temporary in nature, with the growing potential of higher price targets.

One indicator that suggests continued (although not uninterrupted) strength for the S&P 500 is VIX (Chicago Options: ^VIX) seasonality. In fact, VIX seasonality is quite pronounced.

A simple but comprehensive VIX seasonality chart is available here: VIX Seasonality Chart

As always, I will share my findings and buy/sell signals via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE Newsletter.

 

S&P 500 Pop Above 1,700 Explained

Guess what! The S&P 500 now trades above 1,700.

Should I dare ask, why did the S&P 500 (NYSEArca: SPY) pop above 1,700? As every Grandma and kindergarten kid will tell you, it’s because of what Bernanke said on Wednesday post FOMC address.

This may well be, there’s no denying that the Fed has fueled the stock market, but there’s another – possibly even better – explanation for the pop.

The S&P 500 chart below was initially published in the Wednesday edition of the Profit Radar Report and reveals something not commonly addressed by the mainstream media.

No, it’s not the fact that stocks didn’t pop the trading day after Bernanke’s speech. The chart shows that price action was contained by two red trend lines that acted as resistance.

Why and how do trend lines work?

This may be a corny illustration, but resistance levels contain stocks like a fence contains a lion. If the fence is broken the lion dashes out. Like a freed lion, the S&P 500 (NYSEArca: IVV) dashed higher as soon as ‘the fence’ (double trend line) was broken.

This hourly chart evidences that short-term trend lines work quite well. Just because resistance was broken doesn’t mean a rally will continue indefinitely.

Quite often the S&P (NYSEArca: VOO) will come back down to test support (prior resistance) before moving higher or it will run into a new resistance level.

What’s the Next Target or Resistance?

To discover higher resistance levels, we need to zoom out and look at a daily or weekly chart.

The Profit Radar Report, a premier resource for S&P 500 technical analysis, has already identified the next strong resistance and target level for this rally.

It’s too early to tell for sure, but the upcoming resistance should be important as stocks run the risk of declining significantly once resistance is reached.

You may check out the Profit Radar Report or take a look at this free do-it-yourself paper on S&P 500 technical analysis.