Originally posted 10-Jan-2012
One forecaster has correctly predicted the S&P 500 year-end close within an average of 2% for the last 4 years:
|Year End||Estimated||Actual||% Difference|
This forecast is not from a human, or a computer program—it’s the year-end closing value of the S&P from 6 years prior. The chart below shows SPY (effectively 1/10 of the S&P) from 2003 to 2006 with SPY from 2009 to the present superposed on the same day of the month.
At the bottom I’ve shown the VIX index for these two different time spans.
I don’t believe patterns from the past are reliable in predicting the future. It’s not surprising that markets recovering from crashes will show a similar trajectory, but since first seeing this pattern in November, 2009 I’ve been surprised at the close correlation. This year showed the biggest divergence, with 2011 SPY going as much as 19% above the 2005 SPY and 10% below before moving back into synchronization.
One thing is clear—volatility since the 2008/2009 crash continues to be elevated. I predict that the market in 2012 will not be for the faint of heart.
- When an Index Becomes a Security
- SPXH—Hedging the S&P 500 For Free?
- A Tale of Two Bulls
- Prediction: Dec 31,2013 S&P 500 close at 1468.38 up 2.96%
- What about 2011—will it be a replay of 2005?
Thursday, January 17th, 2013 | Vance Harwood