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Preface to all eight parts: This year was an extraordinary one for the world and an amazing one for Slope. Our user base has grown, our site has dozens more features, and we are poised for a great 2021, which will be our sixteenth year in business. Out of the thousands of posts this year, we have picked some we believe you will enjoy re-reading the most.
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Tomorrow is the last trading day of 2020 and with New Year’s Day on Friday we get another long weekend into the start of 2021 next week. This has been a really interesting year, though a very hard one for many, and will leave a legacy for economies and markets that will likely ripple through the next few years. We’ll see how that develops in 2021.
At the end of every year we like to do a free public webinar or two at theartofchart.net looking at where we see markets going over the next year, and we are doing the ones for next year tonight and tomorrow. All are welcome and the first webinar we are running is at 5PM EDT tonight (Wednesday 30th January) looking at equity indices, FAANG stocks and key sector ETFs and, if you’d like to attend, you can register for that here. The second webinar is at 5PM EDT tomorrow (Thursday 31st January) looking at commodities including metals, energies, softs, meat and grains and, if you’d like to attend, you can register for that here. As always all webinars are linked from our monthly free webinars page at our blog, currently December.
As I look forward into 2021, I want to paint a broad picture of what to look for directionally, as well as key turning points to be aware of. I will focus on the two main trades I am most excited about, SPX and crude oil. As we examine the below charts and analogs, consider them as a rough guide, using crayon not pencil.
SPX Forecast Let’s begin by taking a look at the broader market via SPX. To gain a big picture forecast view of SPX I prefer to utilize the 10 year crude oil to SPX analog. This analog was discovered by Tom McClellan, and looks back to see what crude oil was doing ten years ago to give us a glimpse of what to expect with the broader market now. A note on this analog, and the other analogs I will discuss in this post; they will look to show you direction and key turning points to be on the lookout for. They do not reflect the magnitude of the move to expect.
You know the market is sky-high when the comments section over at ZH has permabulls chastising the regulars there and are getting no flak in return. Twelve years of a straight-up market has left the normal ZH crew speechless.
There are other data points, of course, to illustrate our nosebleed levels. The Schiller P/E Ratio, for instance, shows the only time we’ve been higher is during the Q1 2000 peak. (And it’s funny to consider just how relatively tiny the national debt was back then).