Mark Arbeter’s latest technical market update is a great read. He highlights how unanimous the S&P 500 year-end price targets from the big banks are.
“Predictions for 2017 are universally bullish as well as tightly packed. That is, year-end (YE) targets are very close together = group think. A survey of 19 strategists’ came up with an average year-end target of 2,368 for the S&P 500 with almost all the estimates within 3% of the average”
Mark also discussed what can happen in this situation
So, with many strategists’ YE targets bundled together, what may happen? If the S&P 500 hits or exceeds many of these targets by mid-year, many strategists raise their targets not wanting to be left behind, and the market peaks in the 2nd half, making their original forecasts closer to the YE finish for the “500.” So the danger here with so many forecasts tightly bound is that one way or the other, they get whipsawed together, getting too bullish after the fact or too bearish early this year if we get a jolt to the downside
This is something worth watching right now. The long term charts look great. There are plenty of reasons to be long term bullish. That said, we always have to keep an open mind about how the market will play out as stocks head into earnings season.
That doesn’t change much for swing traders such as myself. We just need to be a little more stringent in our trade selection as market breadth tapers off.
Trade ’em well!