Unexpectedly Intriguing!
December 1, 2014

On Friday, 21 November 2014, the CBOE's implied forward dividend futures data for 2014-Q4 suddenly spiked upward, rising from $9.93 per share to nearly $10.26 per share. By Wednesday, the expectations for the amount of cash dividends that would be paid before that futures contract expired had risen to $10.29. And then, last Friday, 28 November 2014, the amount of cash dividends expected for the S&P 500 in 2014-Q4 returned to Earth, falling to $9.96 per share.

Coincidentally, that's very consistent with the level to which stock prices moved during the week.

Alternative Futures - S&P 500 - 2014-Q4 - Standard Model - Snapshot on 2014-11-28

The big question now is to which other quarter will investors turn their attention toward next? The answer to that question will have major ramifications for the direction of stock prices, with a shift to 2015-Q2 representing the best case scenario, as the expectations associated with that future quarter would be largely neutral to slightly positive with respect to where stock prices are today, while a shift in focus to 2015-Q1 or 2015-Q3 would coincide with falling stock prices.

Change in Expected Growth Rates of Trailing Year Dividends per Share with Daily and 20-Day Moving Average of S&P 500 Stock Prices, thru 2014-11-28

There is a new wild card to consider too, which hinges upon whether the European Central Bank will adopt an effective strategy for implementing quantitative easing policies in an attempt to stimulate the struggling national economies of Europe. If the ECB does announce such a policy this week, we would expect to see the effect in the U.S. stock market in the form of a positive, but small noise event - much as the Bank of Japan's surprise announcement that it would boost its QE program had several weeks ago.

In the absence of such an announcement, then the dominant action in the U.S. stock market will likely be primarily affected by investors shifting their forward looking attention toward a more distant future quarter, where the drama will revolve around which one they choose.

Depending on how all this news might break, we could be in for an interesting week!

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