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S&P 500 Mostly Flat in Holiday-Shortened Week 3 of April 2019

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If investors are in any rush to push the S&P 500 (Index: SPX) above the record high closing value of 2,930.75 it set back on 20 Setpember 2019, they didn’t betray any sign of it during the Good Friday holiday-shortened third week of April 2019, as the index mainly drifted sideways during the week.

Alternative Futures - S&P 500 - 2019Q2 - Standard Model with Annotated Redzone Forecast - Snapshot on 19 Apr 2019

On the plus side, we’ve finally reached the end of our redzone forecast period, which we developed over 14 weeks ago. The following chart shows the seemingly remarkable result, where every daily closing value for the S&P 500 falls within the forecasted range.

Alternative Futures - S&P 500 - 2019Q2 - Standard Model with Annotated Redzone Forecast - 21 Dec 2018 to 18 Apr 2019

We say “seemingly remarkable” because we broke with our previous practice of simply drawing a red-shaded box indicating the forecast on the spaghetti forecast chart generated from our dividend futures-based model of how stock prices work that never changes over time, regardless of changes in future expectations. Here, because of the sheer amount of time we were seeking to bridge in compensating for the “echo” of past volatility that arises from our model’s use of historic stock prices as the base reference points from which it projects into the future, we set our redzone forecast up this time to automatically update as future expectations changed.

Starting with the assumption that investors would largely be focused on 2019-Q1 over much of this period, and later on 2020-Q1 after 2019-Q1 came to an end, we anchored one end of our experimental redzone forecast range to the level of the S&P 500 at the close of trading on Friday, 11 January 2019. We then fixed the other end of the range to what our dividend futures-based model forecast projected the level of the S&P 500 would be on 22 April 2019, provided that investors would be setting stock prices in accordance with the future expectations associated with the distant future quarter of 2020-Q1.

As those future expectations have changed over the last 14 weeks, so has the trajectory of our redzone forecast range, which has continually fluctated from week to week. Fourteen weeks later, every single point of the actual trajectory of the S&P 500 falls within the range defined by how we introduced our assumptions back on 14 January 2019.

Fortunately, since we’re now out of the period where the past volatility of stock prices affects the accuracy of our model, we can finally stop, where the model will better communicate how far forward in time investors are focusing as they set current day stock prices.

Meanwhile, for a week where the market didn’t move very much, there was still quite a lot of noise for investors to absorb, as evidenced by the major market-moving headlines of the week.

Monday, 15 April 2019
Tuesday, 16 April 2019
Wednesday, 17 April 2019
Thursday, 18 April 2019

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