Robert Lamy: The U.S stock market posted a remarkable performance in 2013, up by 30% from the end of 2012. The last year gain brought the cumulative increase in the stock price index to 170% since the trough of the bear market in March 5th, 2009. In mid-January of this year, however, the stock market began to weaken. Indeed, the S&P 500 index posted losses in nine of the past thirteen business days, registering a cumulative decrease of 5.2% by February 5th. Is the current downward trend announces a reversal in the stock market cycle to a bear market?
The Forecasting Advisor has developed a unique stock market cycle model to evaluate the likelihood of a reversal to a bear market. The model takes into account the state of the economy and the labour market, along with a number of other economic indicators, to calculate the probability of a reversal to bear market. Chart 1 reveals that the model predicts very well (in-sample) all the reversals in the stock market cycle between the bull and the bear phases over the past fifty years, including during the 2007-2009 period. In addition, in real time forecasting since December 2010, the model was successful in predicting correctly the continuation of the bull market during each of the significant corrections that arose over the past three years (see Chart 2).
Given the recent performance of the stock market, there is increased uncertainty among individual investors and stock market brokers about the prolongation of the actual bull market into its sixth year. Many of them are asking themselves if the declines over the past thirteen business days is the signal of the near end of the fifth longest bull market since WW II and the beginning of a new long bear market.(...)Click here to continue reading the original ETFDailyNews.com article: Probability Of A U.S. Bear Market [Dow Jones Industrial Average(INDEXDJX:.DJI), SPDR S&P 500 ETF Trust]You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)
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