Like January 1995, this is one of those rare moments when the S&P 500 is on a cusp of a massive rally. And by massive, I mean 20%, 30%, etc. Here's my rebuttal to all the doomsayers who think that the S&P will fall at least 10%.

VIX being compressed doesn't mean anything.

Some banks like UBS have pointed to the fact that VIX is very low. They believe that such a low VIX foretells a VIX spike and a S&P crash. History proves that their belief is wrong.

VIX is never at a historical low when the S&P is at the top of a bull market or before a massive correction. Historically, VIX always rises months before a bear market or big correction begins.

In addition, VIX being extremely compressed is actually a good thing for the U.S. stock market. A mere 2-3% pullback in the S&P will cause VIX to spike, thereby eliminating this problem. VIX is meant to be used as a mean reversion indicator. After VIX spikes, it means that the S&P's bottom is in.

There is literally no bad news.

Basically, everything that Trump wants to do is good for the economy (and hence the U.S. stock market).

1. Trump wants to repeal Obamacare. Although Obamacare is good for many low-income individuals, it is a big drain on small and medium sized businesses.
2. Trump wants to cut taxes on businesses. Cutting taxes is always good for business, no matter how much you cut it by. It's true that businesses might not hire more workers if their tax bill is cut. But with all that extra cash, they may very well decide to buyback their own stocks, which is good for the U.S. stock market.
3. Trump wants to invest in U.S. infrastructure "bigly".

Now it's unlikely that Trump will accomplish all of his pledges. However, like Warren Buffett said, Trump will at least accomplish SOME of the above 3 goals. Accomplishing any single one of those 3 will be a boon to corporate America and hence the U.S. stock market.

The U.S. stock market rarely sells off when the economy is strong and the business environment is improving.

In fact, this is the reason why the S&P has been unable to fall even fall 5%. With so many people foreseeing good federal policies in the next few months, who is left to sell? Everyone is buying the dip. When that happens, there is no way the S&P can even fall 10%.

In addition, it doesn't look like Trump wants to fight a trade war with China/Mexico. He is currently negotiating with them by displaying the "good Trump" side of his personality. If he really wanted a trade war, he would have done it weeks ago when he first entered the office.

The economic data is promising

Short run market fluctuations are mostly random, but medium-long term fluctuations are almost all based on the U.S. economy. Our models predict the future 6-12 month performance of U.S. stocks based on the current state of the U.S. economy (hint: GDP is not a factor).

The U.S. economy is growing nicely at the moment. Out of the 44 different indicators used in our model, more than 2/3's of them are in solid growth mode. In addition, U.S. corporate earnings are growing (after a long hiatus in 2015 and 2016).

When corporate earnings grow, the U.S. economy grows steadily, and all federal policies are supportive of business, there is no reason for the S&P to fall "bigly".