EconomicGreenfield

The June 2013  Livingston Survey (pdf) published on June 6, 2013 contains, among its various forecasts, a S&P500 forecast.  It shows the following price forecast for the dates shown:

June 28, 2013   1643.5

Dec. 31, 2013    1667.8

June 30, 2014   1713.1

Dec. 31, 2014    1750.0

These figures represent the median value across the 30 forecasters on the survey’s panel.

_____

I post various economic forecasts because I believe they should be carefully monitored.  However, as those familiar with this blog are aware, I do not agree with many of the consensus estimates and much of the commentary in these forecast surveys.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1638.52 as this post is written

On June 29, 2011 I wrote a blog post titled “Financial Stocks – Notable Price Action.”  This post is the latest update of that message.

Although financial stocks have (in general) increased in price since 2012, I continue to believe that the longer-term “price action” of various financial stocks is disconcerting.  I view the poor performance of these financial and brokerage stocks to be one indicator among (very) many that serves as a “red flag” as to the financial markets and economy as a whole.

Here is an updated chart to that shown in the aforementioned June 29, 2011 post.  It shows the XLF (the financial ETF) on a daily basis since 2007.  As well, the S&P500 is plotted above it, with GS and JPM shown below it.  The blue line on each indicates the 200dma:

(click on chart image to enlarge)(chart courtesy of StockCharts.com; chart created by and annotated by author)

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1649.60 as this post is written

In the June 29, 2011 post (“Financial Stocks – Notable Price Action”) I wrote the following:

I think that the relatively poor “price action” of various financial stocks is notable.  It is one of many current indications that overall stock market health is not as strong as a casual glance at the major indices would indicate.

I continue to believe that the lagging / “sagging” price of various financial stocks is highly notable.  Here is a chart that I created a while ago that provides another view of the poor “price action” of the financial stocks vs. that of the entire stock market, as depicted by the S&P500:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart created by and annotated by author)

-

The above chart is depicted on a daily basis, LOG scale, since 2007.   On each of the three plots, a blue line depicts the 50dma for perspective.

As one can see, there has been an interesting progression of the relative price of the XLF (Financial SPDR) vs. the S&P500, as seen in the top of the chart.  In the middle of the chart, the same can be seen in the $XBD (Broker/Dealer Index).  Generally, since mid-2009, the price of both the XLF and $XBD have been on a slow downward trajectory relative to the price of the S&P500.  The S&P500 is plotted on the bottom of the chart.

In my experience, any time the financials lag the general stock market for a considerable period, it is generally a “red flag” that should be closely monitored.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1649.60 as this post is written

This post is the latest I have written concerning the stock market.

For reference, below is a one-year daily chart of the S&P500 through May 15 (with a closing price of 1658.78), indicating both the 50dma and 200dma:

(click on chart to enlarge image)(chart courtesy of StockCharts.com; chart creation and annotation by the author)

There are many aspects of the “price action” of the S&P500, as well as many individual stocks, that are notable.  I commented upon this in a variety of past posts, including that of February 19 (“Excessive Positive Sentiment And Froth In The Stock Market.”)

As I mentioned in that post:

Many stocks and indices show an increasingly “parabolic” trajectory.

Since that post, one can see from the above chart that the S&P500 has continued its rather remarkable upward trajectory, especially since mid-November.  The “parabolic” price action has intensified.  I believe this “parabolic” trajectory is highly notable when viewed from a long-term historical perspective.

While this strong rally is not in itself necessarily indicative of impending problems, there are a variety of measures that are cause for concern.  Some of those measures were discussed in the aforementioned February 19 post.  Many others also exist, including both those that are “technical” in nature as well as those that could be considered “fundamental” in nature.

Among commonly stated reasons (as seen in the popular media among others) for this strong stock market rally and resulting recent new record high levels in the S&P500 (as well as Dow Jones Industrials) include the oft-stated “accommodative” (or  ”easy money”) monetary policies as well as the “strong earnings” that are projected to further increase in 2013 & 2014.  The conclusion drawn by such reasoning is that unless there is a substantial change in either monetary policy, or a significant fundamentally-led change in earnings projections – neither of which is seen in prominent forecasts – the stock market’s current levels are not only “justified” but the stock market is seen by many as being “attractively” valued on such measures as (forward) PE Ratios.

My analyses, however, continues to indicate a starkly different conclusion.  I continue to view this stock market as not only an asset bubble, but also one that is exceedingly large.  While I concede that this view is very unique and not necessarily an “obvious” conclusion,  like many bubbles it will be evident in hindsight.

As well, my analyses indicate that the “popping” of this equity bubble will have a profound and lasting negative impact on the economy.  While many people believe that bursting equity bubbles don’t represent a substantial threat to the larger economy, I continue to believe that their analyses and conclusions are not pertinent to our present situation.

Cumulatively, this parabolic stock market and its various “mania” characteristics are yet another “danger signal” in the overall financial system.  As I have written, my overall analysis continues to indicate a building level of financial danger, very large by historical standards.  My analyses indicate that such danger and its resolution will have highly notable future consequences, including that of a stock market crash that is outsized by historical standards.

_____

The Special Note summarizes my overall thoughts about our economic situation

SPX at 1658.78 as this post is written