UPDATE (11 December 2016): We updated this article to reflect our latest 2017 forecasts.
What will markets do next year? That is the trillion dollar question top of mind of every investor.
As the last quarter of 2016 has started, new trends are unfolding, so it is about time to look into the market trends for 2017. Although we do not engage in price predictions, our methodology allows to forecast trends.
We have written many market forecasts for 2017. In this article, we selected 5 market forecasts which we believe could benefit every investor.
Market Outlook 2017 According To Our Proprietary Indicators
As 20 Year Treasuries have peaked in July of this year, it is obvious it will be followed by a retracement. Now here it becomes a bit more tricky. We see two potential scenarios playing out in terms of retracement:
- Scenario 1: A retracement in bonds will come with significant risk taking, which will push bonds to their lower support at around 105. In that case, rates will rise significantly, and, in doing so, stocks will go much higher as gold would feel a lot of pressure.
- Scenario 2: Bonds will retrace mildly, rates will rise moderately, stocks will do well as the sentiment will still be “risk on” but only moderately. In that case, 20 Year bonds will retrace until the 120 area.
First and foremost, in order to determine the answer to this question, we remain focused on key price levels on the chart(s), combined with sentiment, both fundamental components of our thesis. As outlined in a recent piece, we do not expect a stock market crash in 2017. On the contrary. But we should always be on the outlook for changes in trends; a bearish scenario would kick in if the S&P 500 would breach the 2000 level and, ultimately, the 1850 level
We see gold moving towards the lower area of its bearish trend channel. Right now, support comes in around 990 USD. By the second half of 2017, that will be around 890 USD, which is exactly the peak of 1980. In other words, we do not exclude the scenario in which the gold price will hit 890 USD in 2017 after which it will turn around and evolve into a new and strong bull market.
When examining ongoing price action in the stock market chart, we see many things, but certainly NOT a stock market collapse in 2017. If anything, the retracement in September tested the 2016 breakout level, which we consider an incredibly bullish sign. In other words, the stock market collapse story could work well as a “story” to sell page views, but it is not a serious thesis when looking at a chart.
Additional market forecasts for 2017
The ongoing market sector rotation favors value stocks over growth stocks. Uncoincidentally, all all attractive sectors we identified are part of the segment ‘value stocks’. This article highlights 5 specific sectors which are very bullish going into 2017.
The chart of the Shanghai Exchange makes our point. The chart setup is truly exceptional, we have not seen such a pattern in a long time. Two trendlines are colliding right at the 3000 level. This is huge, as a big move is coming very soon. As support lines have held consistently over the last two years, the odds favor a bullish breakout, leading to a very bullish stock market in China in 2017.
By far the most interesting emerging market on our rader is India. It is our favorite market for 2016 and beyond.