Individuals who want to make money by trading equities might benefit from paying attention to stock speculators.
One good place investors can start is perusing the predictions that market experts have made about the future movements of the equity market. These can help a person who wants to learn more about trading stocks get a sense of what top experts think the market holds.
Technical analyst predicts S&P will reach 2,000
For example, Louise Yamada, a well-known technical analyst, recently predicted on “Futures Now” that the S&P 500 Index will rise toward 2,000, according to CNBC. In addition, she forecast that the Dow Jones Industrial Average, another benchmark group of stocks, is on its way to 17,200.
When justifying these estimates, Yamada pointed to a “continuation pattern” that exists in the S&P’s movements over the last three months, the media outlet reported. This pattern could mean that the benchmark group of stocks will continue to move higher, to approximately 1,985.
However, she emphasized that both the Nasdaq Composite Index and the Russell 2000 have been struggling, according to the news source. Yamada emphasized that these indices, which contain the stocks of smaller companies, have been diverging from the performance of the S&P and the Dow, which means that equities of these more modest firms could be facing a weakening situation.
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Several market experts make bullish forecasts
Yamada is certainly not the only market expert who has provided a bullish prediction about the U.S. stock market. Seth Masters, chief investment officer at Bernstein Global Wealth Management, predicted in 2012 that the Dow would reach 20,000 by the end of 2019, The Wall Street Journal reported. The Dow has risen to within 20 percent of this benchmark, which has motivated Masters to predict that the index will reach 20,000 earlier than he thought.
While Masters provided a bullish forecast for the Dow, Robert Doll, chief equity strategist at Nuveen Asset Management, recently revised his year-end forecast for the S&P 500, according to the news source. At the beginning of 2014, he estimated the benchmark group of stocks would reach 1,950 during the year. However, after the S&P came within a point of this level, Doll says the index will probably move higher.
Speculators load up on short bets
While these predictions may seem rosy for the broader stock market, individuals who want to make money by trading these financial instruments should also consider those who are less bullish.
Recently, these key market participants have pushed bearish bets on an exchange-traded fund tracking the S&P 500 to 11 percent of total shares, which is the highest this figure has reached since 2012, according to data compiled by Bloomberg and Markit Securities Ltd. These investors are loading up on these wagers at a time when the stocks contained in the index are reaching valuations they haven’t had since 2007.
Amid this strong appreciation, many market participants have been rooting for equities to fall in the value, the media outlet reported. Stephen Solaka, managing partner of Los Angeles-based Belmont Capital Group, spoke to this sentiment. He emphasized that many are hoping the stock market will plunge in value.
In some cases, their prayers are being answered. Many small-cap shares have been running into some challenges recently.
The Nasdaq Composite and the Russell 2000 have suffered lackluster performance recently, according to CNBC. Figures provided by Pension Partners reveal that since the start of March, the smallest 500 stocks in the Russell 3000 have fallen 15 percent, MarketWatch reported. The 1,000 smallest have dropped 8 percent.
Yamada noted her concerns with these developments, according to CNBC. She said that both the Russell 2000 and the Nasdaq Composite appear weaker than the S&P.
“There’s a little bit of a glitch in the sense that you have a dichotomy in the market. The Russell 2000 and the Nasdaq look a little bit more precarious,” she stated, the media outlet reported. “When you start to see part of the markets separate from the leaders, that generally means that under the surface you’re seeing some deterioration. But that’s not to say that you can’t get some improvement here.”
Some shorts have generated robust returns
Traders have generated strong returns from certain short wagers, according to Bloomberg. For example, shares of major retailer Staples Inc. have plunged 29 percent in 2014. The company is running into trouble as it copes with falling demand and stiff competition.
Investors have built up substantial bets that the company’s stock will fall in value, the media outlet reported. Of the total shares outstanding, 13 percent have been borrowed to wager the company’s equities will depreciate.
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