Google includes an email subscription feature for this blogosphere, so this is a test…

(Click on the graph to enlarge.)

Starting in January 2014, I’ll post an updated performance forecast each month for the U.S. stock market that applies to the coming 6 months.  This is a big change for me — up to now I have posted just in October and May.  Hopefully, the shift to monthly forecast updates will give a better sense of where my forecasting models expect the stock market to go.

I will continue to base my forecasts on the Value Line Arithmetic Index  which tracks the approximately 1,700 stocks that the Value Line Investment Survey follows and weights each stock equally.  Because of the equal weighting, the Arithmetic Index has somewhat less variation than capitalization-weighted indexes like the Standard & Poor’s 500 or price-weighted averages like the Dow Jones Industrial Average.  Generally, the other market indexes move much like the Value Line Arithmetic Index, so the forecast given here should apply generally to most other market indexes as well.

The graph above is a sample of how the blog will appear going forward.  The December forecast is for an increase of  about 6% by the end of May, 2014.  Since the market has performed better than forecast for the past few months, a small and temporary pull-back in the next few months looks likely.

Please email me any thoughts or questions you may have.

Probability of at least breaking even: 73%
Probability of an 8%+ dip along the way: 9%.

1: Economic performance remains below potential – that leaves room for improvement – but, less room than before.
2: Leading economic indicators are slowly rising – but, they are wobbly, conflicted, and near-flat.
3: Recession probabilities remain low because the Federal Reserve continues to hold down interest rates – but, worry grows about what will happen when the current “extraordinary measures” of the Fed are scaled back or stopped.

 All that really matters, though, is that the models get the main story right:

Really big move up: not so likely now
Really big fall: very unlikely without a Black Swan
Bumpy normal with a positive tilt: my best guess

Probable market gain:  12%                 11%
Prob. of gaining:          83%                  ü
8%+ midcourse dip:     50%                  Hit  -5%

I ran my stock market forecasting models updated for the end of May.  Despite the strong performance of the U.S. market this month, the new forecast is even rosier than the numbers as of the end of April.

Probability of at least breaking even: 83%
Probability of an 8% dip along the way: 50%.

Statistically the stock market tends to be weak over the second half of the year, but my models say that probably will not be true this year. Why?

Here is a PDF of my full market report at scribd.com
http://www.scribd.com/doc/145298705/TomT-Stock-Market-Model-2013-05-31

For several years I have been testing a fairly simple model I developed for forecasting the U.S. stock market.  Every six months or so I have included my forecast in a newsletter that I distributed to patient friends.  The results have been pretty encouraging, so I decided to try adding them to a blog.

My current forecast covers May to the end of October 2013. The models forecast a stock market rise of 7%.  The probablility of the market at least breaking even during the period is 76%. The chance of at least a temporary correction during the period is better than even — 53%.  Personally, I think that the model is a bit optimistic, so my own guess would be for a return of only 4% or so.

Here is the scribd.com link for the full newsletter:
http://www.scribd.com/doc/136737586/TomT-Stock-Market-Model-2013-04-21