The S&P 500 index has arrived to its bottom. I explain why in this article. My opinion is that the main trend is downward until...

1. The S&P 500 index has arrived to its bottom
However, this bottom could be only a temporary
bottom.
Dear followers,
Here I am with my monthly report.
The last movement of the S&P 500 has surprised many traders and investors.
They are wondering: “Has the S&P 500 arrived to its bottom now, so that I can buy again?”
First of all, I have to explain that the drawdown of this index is due to a reduction of the expected value of US
GNP.
The value of the index has almost remained the same in the last 5 months: 1990 about.
The expected dividend for 2016 has not changed. Interest rates are stable and the financial risk of this index
has not changed.
Only one thing has varied a lot. The GNP has passed from 2.2% to 2%. It may seem a little change, but it
has provoked the last downfall.
However, the 2% of growth of the GNP is the same value that was expected during the last bottom in August
2015.
The graphic of the S&P 500 tells us that its fair value was about 1990 in that period.

2. When its price was under a 6% respect its fair value in the bottom of August, great funds started to buy.
Now, this index is in a similar situation: its price is under a 6% respect its current fair value.
Should we buy now?
It is likely as there are many buy volumes in the last bottom.
However, the real question is: “Will a simple pull back take place or will a new uptrend take place?”
If the growth of US GNP decreases, there will be a new downtrend after the next upward pullback.
This is sure. It is a simple mathematical formula.
Is there any way to understand what is the most likely scenario?
You should ask to the FED bank about its willing to print new money for real economy. I do not know
anybody there inside.
My aim is to catch the next pullback and then to understand if the S&P 500 will go higher respect its last top.
As regards a likely pullback, let us ask to our two etfs that are our friends: QQQ represents the S&P 500
and QID is an inverse etf respect the S&P 500 value.
Here are their charts.

3. Can you see high volumes on the top of QID and increasing volumes in the bottom of QQQ?
I think that they represent a rollover of money from short to long positions.
Therefore, a pullback is very likely but I think that the main trend will be downward until May 2016.
If economy worsens, the GNP growth can go lower than 2%.

4. What about my index forecasts? Were they wrong?
My forecasts are right the 75% of times as they are based on a fractal study of the past.
If something important changes, they have to change. There cannot be only one possible future. We have
never to forget this.
The following forecasts suggest that a pullback is coming and that a new top will take place around either the
15th of February or the 29th of March, if nothing else changes dramatically in the meanwhile.

5. The forecast of the Italian index seems to be enlighting as regards European weak economy an how this one
could impact on the US stock indices.
Here is its chart.
This could be another scenario but we can see a pullback much better.
Are there stocks worth buying in this pullback?
I think that the leading stocks are the best ones.
As I have promised, I will inform you about one of them in the next days. I do this every three months for my
followers.
My conclusion is that making money in an unstable stock market without a stable trend is very difficult.
Surprises always occur.
A trend follower can make money if there is a continuous trend to stay with. However, this is an unstable
economy as there are problems everywhere in the world now. This makes trading a great challenge.
Personally, I think that this just-started downtrend can last for some months and we will take advantage of it
when it is more stable.
The "European forecast" of the stock market for the next few months looks to be the most likely for US stock
market too.

6. Share my article with your friends. You can find the buttons here below.
Kind regards,
Fredrick
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Visit:
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