Can Market Behavior Be Accurately Predicted Weeks in Advance?!

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The answer is YES!

It you are a subscriber to the Efficient Market Hypothesis (EMH) however, you may not agree with this answer. To those who are not familiar with EMH, below is one definition according to

An investment theory that states it is impossible to “beat the market” because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. According to the EMH, stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. As such, it should be impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.

An interesting hypothesis but one that is far from reality and empirical evidence, I am afraid. Since seeing is believing, below are a couple of charts of the S&P with our proprietary Master Market Forecast plotted on them by our software as a simple line in its raw format and without the application of any phase shifts to the curve.

Depending on the phase that markets are in, it is normal for markets to experience phase shifts of one or two days either way. For example, we currently apply a negative one day phase shift to the S&P forecast as per the market’s recent behavior. However, what you see in the charts below is the raw forecast without any phase shifts.

The first chart shows a snapshot of the S&P along with its forecast taken back on May 13th, 2015, while the second one shows how the market has behaved relative to the forecast one month on (i.e. as of June 12th).

SPX forecast 20150513

SPX forecast 20150612

Notice how our forecast has accurately predicted the market’s behavior leading up to the May 19th/20th top (which we have by the way nailed to the exact day using other tools in conjunction with the forecast as can be seen in this public blog post) and the ensuing decline from that point on, weeks in advance!

What does the Efficient Market Hypothesis have to say about that?!

By the way, we have just made a limited number of our monthly and quarterly Master Market Forecasts available to the public. If you are interested in purchasing your own copy of either one before we run out, please go here.

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