Research (Investicniweb.cz)
World markets  |  May 23, 2012 08:17:32

Equity peak in 2012? Cyclical stocks warn



I recently wrote that the stock indices apparently not yet reached the peak price, he could be in the S & P 500 to form sometime in the fall. I got on the strength of U.S. stock indices and the fact that we are in the last year in the U.S. presidential cycle, the year of parliamentary elections. The reasons for caution, however, is more than enough. (SOURCE: Finecharts.cz)

U.S. elections are in November. Election years are historically in terms of performance shares very strong, especially at the end of the year. The weakest is the contrary for the second year of the presidential cycle.

It's quite logical, because the election is far away in the second year, politicians who want to be elected, the election campaign even started, it is time the government power to citizens neohlíží. Only later, with the term of the new elections, they start podstrojovat.Last year presidential cycle is strong just before the elections and after them. During the summer it's weak - so could it be this year.

Figure: Typical 4 years of the presidential cycle as an example the S & P 500 If they should be respected presidential cycle, markets should expect a strong end of the year. From this logic, I among others based on their assumption that this year will see a new price peak.

The presidential cycle in the stock market in the U.S.

The events of recent days have forced me to look more closely at current developments in the longer term. Finecharts to use a stock index, which I call SMART INDEX. It consists of shares that very well signal a significant price tops and bottoms.

Index consists of stocks of cyclical companies that responded best of all to improve market conditions during the last phase of long-term trend poklesového, and vice versa behave relatively badly in the final stages of long-term growth trend of the shares. From their comparison with the S & P 500 and can be derived, in which phase of the cycle the market is located.

I will show first the previous bull market peak in 2007. That year culminated SMART index of 24 weeks before the stock market index S & P 500

The top markets in 2007 - SMART index and the S & P 500

Shares which have growth. Presidential elections in the U.S. can help
Shares which have growth. Presidential elections in the U.S. can help

At present, the possibility that we have experienced a bull market peak price, which lasts (lasted) from March 2009. Although I still think that it probably still will be a wave of growth, but cyclical stocks have been weak.

You can also now count five waves of medium-term development since March 2009, which is the typical number of waves, during which a growth stock market (three growing waves separated by two waves of drops).

Notice also how smart price index indicated at the bottom end of 2008.

jpg "rel =" lightbox [article_detail] "> The top markets in 2012 - SMART index and the S & P 500

Picture: ETF for international emerging markets - EFA. It consists of shares of the world's major companies. The risk I drew directly on a graph.

EFA - ETF for international emerging markets

Conclusion: We are probably at the stage of a mature bull market, which investors should adapt. There is no more appropriate time for a major investment, it was in 2009. Now is the index by more than 90% higher than in March 2009. Not to mention the risks outside the U.S. presidential cycle, for example in the euro area.

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