The minute the New Year’s celebrations end, and the markets start trading again, there is bound to be a host of predictions for 2018, and at 24/7 Wall St. we scour our research coverage to bring our readers the top calls from across Wall Street. After a huge 2017, where the S&P 500 was up a strong 19.4%, the Dow Jones Industrial average a whopping 25.1% and the Nasdaq a stunning 28.2%, it may be hard to duplicate the best year for investors since 2013.
Straight out of the box this year comes some prognostications from Ari Wald, the outstanding technical analyst at Oppenheimer. For years the firm Oppenheimer has presented its 10 most important market numbers for the year, and 2018 is no exception. So without further ado here they are:
1. The Oppenheimer price target objective for the S&P 500 for 2018 is 2,900. From current levels of 2,695, that represents an 8% gain for investors.
2. The analysts see the 10-year rate of change for the S&P 500 at an astonishing 200% in 2018. This is measured from the year-end 2008 print of 903 versus their Oppenheimer target price of 2,900.
3. From the 2016 lows, the Oppenheimer team sees a 35-month average bull market cycle duration. This basically means they feel we have some room to continue what has been an outstanding run.
4. They see 60% participation in the market as a very important number and a very important indicator. When many stocks participate in rallies, they typically continue. When market breadth narrows, and fewer stocks are involved, that is often a sign of a market top.
5. Six months is a period for median breadth divergence. The analysts note that internal divergences that occur around a major market top usually are measured between three to six months. They point out that the advance/decline line reached a new high in December, which argues against an impending market top and indicates that the next pullback should be bought. So watch for a 2018 pullback, this could be one of the last times to add to positions.
6. A reading of −20% in any sector is a bad sign for the market. Since 1991, when any sector is down at least 20% the index return has been negative. The good news is that in 2017, the only sector that was negative was energy, and it was only down 4%. Telecom was actually down slightly more at 5%, but there is a limited number of companies in the index.
7. The Oppenheimer team sees the yield of the 10-year U.S. Treasury rising to 3.00%. The bond currently sits at a 2.46% yield, so that would represent a healthy advance. With rates as low as they have remained for years, the analysts actually see low and rising-yields as bullish for stocks in the near term.
8. The Oppenheimer prediction for the U.S. dollar is 88 on the DXY index. The U.S. Dollar Index (USDX, DXY) is an index (or measure) of the value of the U.S. dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners’ currencies. This weaker reading could be a positive for U.S. companies with big international sales.
9. The Oppenheimer team has a $70 price target for benchmark West Texas Intermediate crude oil for 2018. They do see any strengthening in the dollar as a risk to that target.
10. The analysts see gold, which had a decent 2017, as having a resistance level at the $1,400 mark. With gold currently trading near $1,317, that is some solid upside potential. That said, the Oppenheimer team does not forecast a breakout above $1,400. They do see support at the $1,200 level.
While technical analysis is always an important adjunct to regular top-down or bottom-up research, it’s always important to look at trends, which is what the top technical people do. Trends have a tendency to repeat themselves, and over time, can give investors a solid blueprint for the future.