2013 Forecast for S&P-500 Cash Index

TradingPub Admin | January 31, 2013

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We hope that you enjoy the following guest post from our friends at Hamzei Analytics:

Having traded S&P-500 Futures on a daily basis since Q2 1993, one can get a sense of when our markets are happy as a clam, the economy is improving at the margin and the tendency of stock market indices to rise often after a moderate pull back, or in contrast; when almost everything goes wrong and we are heading into a poltical calamity or nearing financial abyss. Having said that,  what falls in between, is often a treacherous back and forth range-bound price action that makes “Market Profilers” (and your broker) extremely happy.

In a capsule form, what we have witnessed and experienced since Q3 2008, has been nothing less than a confluence of turbulent and challenging political & economic events that has spanned over 4 continents and in process has wrecked numerous lives.

2013 forecast

As we start 2013, the core challenging issues facing US Markets (EuroZone, China, Federal Gov Deficit, Fiscal Cliff) have been catergorically discounted by market participants in favore of a more bullish outcome.

Low Interest rates shall remain at current levels for the foreseeable future per Fed Minutes.  The SP-500 Cash Index (SPX) P/E ratio is at ~17.2 (based on ttm), with Dividend Yield of 2.2%.  Forward 12-mo. estimate (by Birinyi Associates) puts its P/E ratio at 13.15.

Today, a survey conducted by Yahoo Finance indicated that over 50% of retail investors were NOT ready to invest in the stock market.

When you put all the tea leaves together, this market is simply inexpensive at current levels.  A 10% change from recent highs puts SPX  trajectory at 1630s.  If you take the all-time-high of 1576 (Oct ’07), a 10% move puts it at 1733.

Bottom line:  While we are cognizant that often times things don’t go according to the plan, ceteris paribus, we anticipate SP-500 Cash Index (SPX) to trade in high 1600s and possibly touch 1700 during the balance of 2013.