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Saturday, July 14, 2012

Past performance of S&P500 during US Presidential Election year ? Is Dow heading back to 8000 ?

This has been the craziest year for stock market. Since the beginning of the year, Global economy showed slowdown in every sector. Macro fears has been maximum, but fear index volatility Vix is down near 52 weak low. Every bad news sounds as if there could be another Lehman like event. 

This is election year, so expect equity to be positive for the first half. Once election is over, S&P500 will turn negative for the year. 

Table Below Shows Market Returns for Each Election Year Since 1928

S&P 500 Stock Market Returns
During Election Years
192843.6%Hoover vs. Smith
1932-8.2%Roosevelt vs. Hoover
193633.9%Roosevelt vs. Landon
1940-9.8%Roosevelt vs. Willkie
194419.7%Roosevelt vs. Dewey
19485.5%Truman vs. Dewey
195218.4%Eisenhower vs. Stevenson
19566.6%Eisenhower vs. Stevenson
1960.50%Kennedy vs. Nixon
196416.5%Johnson vs. Goldwater
196811.1%Nixon vs. Humphrey
197219.0%Nixon vs. McGovern
197623.8%Carter vs. Ford
198032.4%Reagan vs. Carter
19846.3%Reagan vs. Mondale
198816.8%Bush vs. Dukakis
19927.6%Clinton vs. Bush
199623%Clinton vs. Dole
2000-9.1%Bush vs. Gore
200410.9%Bush vs. Kerry
2008-37%Obama vs. McCain
20127.8% and countingObama vs. Mitt Romney

Majority of the investor were hoping of major sell off after negative JPM earning and China GDP slowed down to 7.6%, but once again market reacted in opposite direction to what majority thought. JPM rallied 6%, while Dow Jones was up 204 point, S&P500 22 point and Nasdaq 42 point. For the week, Dow was up 4 point, S&P500 was up 2.1 point and Nasdaq was down 29 point. since 4th June, Dow is up 732 point, and s&P500 is up 79 point.

Below chart shows, 1 month, 3 year and 15 year chart of Dow Jones. Next week is very important, if Dow breaks 12,840 resistance, its going above 13k. 1 Month chart needs one more day of rally, to confirm the uptrend. Dow has been in 8000 - 12,000 range for past 15 year. 15 year chart shows, there is possibility of Dow going back to 8000-9000 level because the bull rally which started in 2009 needs correction which hasn't happened. There is no doubt fed will manipulate this market which they are doing even now, but they were present when flash crash happened  and when market dropped 1000 point in 2008-2009,2010, 2011 and 2012.

Dow jones 1 month chart
Next week is very important if Dow break 12,840 resistance, then its going above 13000. Dow needs one more day of rally to confirm uptrend.
Dow jones 3 year chart
Dow Jones 3 year chart there is downside in coming month.
Dow_Jones_Industrial_Average_15_year Chart
Dow Jones 15 year chart analysis, shows there will be Lehman like event if  key resistance of 12,225 is broken 
Tips: You don't open life jacket inside Air plane. Same way play with bear stock as hedging against downfall. S&P500 and Dow had more bullish month then bearish. So buy quality stock.