Let’s clarify things: when an asset is consolidated for more than two years, refuses to break when everyone seems to be falling apart, but then decides to leave its consolidation pattern, it is a clear message that has enough power go much higher.
We are talking about US stocks.
It is true that the previous forecast may sound counterintuitive, given the headlines were reading just a couple of months ago:
terrible start of the 2016 stock market just got worse (CNN Money)
stock market crash of 2016: begins the countdown (Market Watch)
Stock markets hit by fears defeat global awareness for the financial sector (The Guardian)
A market analyst intelligent values think this is where we go … drink (Business Insider)
Warren Buffett Predicting Future stock market crash? (Confidential gains)
Analyst: Here comes the collapse of the largest stock market in a generation (Fortune.com)
What stock market crash? Are we saying that all these gurus, analysts, talking heads, with so much knowledge and wisdom of investment, all wrong? The short answer: yes.
It is true that he was looking ugly during those dark days in January and February 2016, but one thing all these gurus of the aforementioned items could do is see the basics that all investors have at their disposal: the cards.
As we have said many times over the first months of this year, the stock market refused to break below important price levels, and that is sufficient evidence to conclude there is no development falling market.
Read, for example, populations of this article to collapse or rally to record highs? what we write in Feburary / March 2016, just at the time when all those articles appeared doomsday.
The only thing that investors have to do is read and correctly interpret the graphs. Everything else is noise. We will repeat to ensure that the message is clear: everything else is noise.
If we agree or disagree with the following statement that we will do in a second is not important; our view is the noise, like the gurus and billionaires. The crux of the matter is that the stock markets of the US show a higher trend, and will trade much higher in 2016 and 2017.
We could find this counterintuitive, but that is not important, that is a view that falls into the category of “noise”. The graphics are made from, and that’s all that matters.
The diagram S & P 500, the barometer of US stocks, is sending a clear message to investors. You want to go higher, as it is emerging from a consolidation pattern 2 years.
Do not forget that the longer a consolidation, more energy is built for the next trend. We expect much higher stock prices over the next 12 months. However, investors in the stock market should not forget this important rule in our “new world”: a careful selection of portfolio companies is a key success (source factor: Investing Paradox 2016: Why buy and hold it is still a good strategy).