The S&P 500 Can Reach 2300 to 2400
- Posted by Greg Harmon
- on September 3rd, 2014
Or maybe not. Forget about multiple expansion or CAGR of earnings. These measures may be good for spinning a tale to justify an end number. And the may give you a ‘fair value’ for the equity markets. But the markets are about capitalism and inefficiency, not fair values. For example, you do not walk into a car dealer and ask for the cost of all the parts and labor and then give them and extra 10% to get to ‘fair value’ for your new car. You do some research as to what others have paid and work on a discount from the sticker. The dealer shows you the inflated sticker and lets you negotiate off a small amount to make you feel better. The he tries to add back undercoating or other nonsense, and increase his profit by offering you financing in house. Nobody knows what the car is exactly worth until you sign on the dotted line for $30,000 with a 5 year 1.9% loan. And then the next guy walks in and the negotiation starts over. Fair value is a nice term that does not exist.
But what does exist is price history and psychological reaction to it. The price history in the S&P 500 has a lot to tell you. The chart above going back to 1980 can have many deep and complex interpretations. But it is the simplest that can help give you a direction. There are two methods of price extension shown that take prior price history into account. The first is the Measured Move. This is as simple as looking at the move from the base in the early 1980’s to the middle of the consolidation zone from 1197 to 2013 and projecting that it happens again higher. This method targets the S&P 500 at 2300. The second is to look at the consolidation pattern itself, a broadening wedge. As it breaks the top the technician then will project the price difference from the widest point as a move again higher. This method targets 2416 for the S&P 500. Nether method is a guaranty but both are methods that traders and investors will be following.
Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through August 2014 Expiry and sign up here
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- Looking at Home Depot to remodel my portfolio
- Premium Earnings 7-27-15
- Top Trade Ideas for the Week July 27, 2015: Bonus Idea
- Top Trade Ideas for the Week of July 27, 2015: The Rest
- Top Trade Ideas for the Week of July 27, 2015: The Rest Premium
- Top Trade Ideas for the Week of July 27, 2015: The Best
- SPY Trends and Influencers July 25, 2015
- Macro Week in Review/Preview July 24, 2015
- How This Week’s Premium Top 10 Performed
- Global Macro Backdrop, its all about the Dollar