A Failed Break Out For The S&P 500

For a moment during the first week of February 2019, the S&P 500 (Index: SPX) looked like it might fully break out of the range described by our redzone forecast, but alas, it only poked just above the upper end of the range for a few days before dropping back into it.

Alternative Futures - S&P 500 - 2019Q1 - Standard Model with Annotated Redzone Forecast - Snapshot on 8 Feb 2019

Had the S&P 500 stayed above that level, it would have been an indication that investors were starting to look further forward to 2019-Q2 according to our dividend futures-based model of how stock prices work. Since they subsequently dropped back within the redzone forecast range, which is based on the assumption that investors would remain focused on the current quarter of 2019-Q1, it's more likely these data points were just temporary outliers.

Perhaps a better question is: why didn't the S&P 500 drop further? We could argue that if investors are more focused on 2019-Q1 in setting stock prices, we should see more of a reversion to the mean that corresponds with that assessment, where the mean would be vertically located in the middle of the redzone forecast range.

We haven't seen a good answer for that question as yet, where none of the market-moving headlines we noted during the past week stood out as potential explanations for why not.

Monday, 4 February 2019

Tuesday, 5 February 2019

Wednesday, 6 February 2019

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