Unexpectedly Intriguing!
March 22, 2016

As we did last week, we'll begin by reminding you of what we said back in the first week of March 2016 before you look at our updated chart showing the actual trajectory of the S&P 500 against the alternative trajectories of what our futures-based model forecast:

That's also true for the projections for the remainder of March 2016, which suggest that stock prices are in for a rough ride before recovering. However, that apparent trajectory is really an artifact of the historic stock prices we use in our model to project their future trajectory, and as such, it is an echo of past volatility, which means that our model will be less accurate until that echo subsides....

So can we predict where stock prices are likely to go next?

Of course we can!... Provided investors keep their forward-looking focus on 2016-Q4 in making their current day investing decisions, we can expect that the S&P 500 will continue to track largely sideways (plus or minus 3% of their current value of just under 2000), through the end of March 2016.

It looks like we're going to skate the upper edge of our impromptu prediction this week, and its quite possible that the S&P 500 will poke above that range before the end of the month.

Alternative Futures - S&P 500 - 2016Q1 - Standard Model - Snapshot on 2016-03-21

The big change in this chart from the previous version is that it now reflects the expected dividends that will be paid in 2017-Q1, which the implied forward dividend futures (CBOE: DVMR) for that distant quarter have initially pegged at 11.95 per share.

In terms of the acceleration of dividends, that future quarter is approximately on par with 2016-Q4.

As a result, the potential volatility of stock prices through the upcoming quarter will be much less than what took place during the first half of 2016-Q1, since the spread between the alternative future trajectories of the S&P 500 is narrower.

Because we're nearing the end of the quarter, let's look past it to see what lies ahead:

Alternative Futures - S&P 500 - 2016 - Standard Model - Snapshot on 2016-03-21

We anticipate that the echo of past volatility affecting the unadjusted accuracy of our model will subside in the second week of April 2016. In the meantime, if you connect the dots for the trajectory for 2016-Q4 on both sides of the echo, and factor in the typical daily volatility range of plus or minus 3%, you pretty much have what our model would forecast for the S&P 500 in the absence of the echo event.

The major market driving headlines for the week are listed below, along with our notes for the week.

It occurs to us that if investors were to suddenly focus on 2016-Q2, now the worst of the alternative trajectories for the future of stock prices, the S&P 500 could drop by 200 points on very short notice. Which is something could happen if Fed officials were to regain enough credibility to have the possibility of a rate hike in 2016-Q2 taken seriously. (Despite their comments from Monday, 21 March 2016, they're not there yet....)

Because all the other trajectories are more positive than that one, one trading strategy that an investor might consider to take advantage of such a situation, without playing around with options or shorting the market, would be to place a limit order to buy long near that level, and then sell when investors shift their attention to a more distant future quarter.

That would assume little risk from changes in expectations for future dividends or a noise event that would send stock prices on a different trajectory, so paying attention to what stock prices are doing with respect to their alternative future trajectories would be required.

Labels: ,

About Political Calculations

blog advertising
is good for you

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts


This year, we'll be experimenting with a number of apps to bring more of a current events focus to Political Calculations - we're test driving the app(s) below!

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

Visitors since December 6, 2004:

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links
Charities We Support
Recommended Reading
Recommended Viewing
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.