2014 market predictions ebook

8/12/2019 2014 Market Predictions eBook

1/21Predictions for 2014-1-

Predictions for2014I n s i g h t f r o m 1 0 i n d u s t r y e x p e r t s



Table of Contents

Introduction

Alan Brochstein

Matt McCall

Tim Melvin

Dave Moenning

Sang Lucci

Vader Trader

Jea Yu

Serge Berger

Christian Tharp

3

4

6

8

10

12

14

16

17

19



Marketfy.com brings the brightest traders in the industry into one single

marketplace - from educational courses and live trading rooms to options

trading and ETFs. Theres a new year upon us with a market more complex

than ever before. Information travels in real time, algorithmic trading domi-

nates the majority of volume, and politicians continue to make decisions at

a snail pace. In other words, theres endless possibilities of where well be

when the clock strikes midnight on January 1st, 2015.

With a plethora of brilliant trading minds at the tip of our fingers, we decid-ed to get 201 market predictions from all the Trading Mavens on Marketfy.

com. As always, these are just suggestions, opinions, and predictions. What

you do with it all is completely up to you.

So let the games begin...

Introduction



What a crazy year 2013 proved to be. I always start the year with my own projection for the

S&P 500 at year-end, my views were pretty extreme relative to other prognosticators at the end

of 2012 with my 1664 call (based on 14.5 PE and about $115 projected EPS for 2015) when the

index had closed at 1426. On August 1st, I increased it to 1740 (based on 15PE and $116 pro-

jected EPS for 2015), and I am assuming that we will end the year now somewhere near there.As I think about 2014, I want to share a market call, a big trading idea and a thematic play.

The Market Will RallyFrom my vantage, stocks arent overly loved despite rallying for more than 4 1/2 years. Part

of this is that the economy remains sluggish, making it difficult to get excited about earnings

growth in general, while the other part is the fresh wounds still from 2008-2009 and even the

NASDAQ crash from 2000. Take a look, though, at the following chart, provided by Baseline:

Alan Brochstein, The 420 Investor

The top panel is price of the S&P 500, and there is no denying that the trend is positive: We

are at an all-time high. The middle panel shows forward PE, currently about 15X. Valuation isfair to maybe slightly cheap, especially if we are going to have an economic acceleration. The

bottom panel shows the dividend yield relative to Treasuries. While I dont expect interest rates

to rise dramatically, it appears that the market is pricing in some increase. Over the past 15

years, the dividend yield, currently at 77%, has been a median of 41% of the 10-year Treasury.

My forecast: 16 PE, 6% EPS growth to $123 for 2015. The bottom-line: A year-end close of

1968. Bonus forecast: Unlike 2012 and 2013, the market will not trade the entire year above the

2013 close in 2014.



Get Ready For A Dramatic Calendar-Shift OpportunityAs we end 2013 and enter 2014, expect some extreme action related to tax-loss harvesting and

capital gains avoidance. We have rallied hard in 2013, and only 169 stocks in the Russell 3000

(



The Bull Market Will Continue: The fifth year is typically one of the best years of a bull market

that can last that long. The market is currently in the midst of the fifth year that will run into

March 2014 and so far it has been able to live up to its hype. Even though the rally is getting

long in the tooth, there is not reason it cannot continue higher with even bigger gains in stocks

The sentiment remains neutral at best and with over $2 trillion dollars on the sidelines andscores of individual investors missing out on the bull market it does not feel like a bubble is

about to burst. As more individual investors finally give in to the bull market it will create a

wave of money going into equities. The chart below shows the inflows into equities that started

during the second half of 2013. This trend is only beginning and will continue to push stocks

higher in 2014. Also to note is that the Fed remains a catalyst for higher stocks as well. Do not

fight the Fed.

Matt McCall, MarkETForce

Bonds will be one of the Worst Performing Asset Classes: In 2012 the yield on the 10-year Trea-sury fell as low as 1.39 percent before finding a bottom. During the second half of 2013 the

yield traded at an average of approximately 2.5 percent. When the Fed begins to taper back the

$85 billion per month asset purchases it will weigh on bonds and push yields higher. The taper

will likely not begin until early 2014, but by the end of the year the yield on the 10-year will test

4 percent. Because of the inverse relationship between bond prices and interest rates, fixed

income will be one of the worst performing asset classes in 2014.



Gold will Fall to $1000/ounce: The decade-long bull market for gold has come to an end. Since

hitting its high in 2011 at the $1920/ounce level the precious metal as been slowing falling as

investors shun gold as a long-term investment. With stocks hitting all-time highs, inflation at

low levels, and the geopolitical climate quiet at the moment there is no reason for investors to

be overweight gold. The few times gold should have been a safe haven investment in 2013 it

failed to rally, suggesting the bull market is over and the gains since 2001 will begin to disap-

pear. Another 25 percent drop in the price of gold in 2014 will bring the metal to the psycholog-ical level of $1000/ounce.



It is that time once again. We are coming towards year end and certain rituals must be per-

formed. He holiday trimming need to be purchased, relatives must be endured and predictions

for the year ahead in the financial markets must be issued. It is really comical to me the seri-

ousness with which all of these oh so precise and carefully considered prognostications shall

be given. Predicting the stock market is a fools errand and I have never given met anyone whocould so in a time frame longer than a day or two with any real accuracy. It was noted econo-

mist John Kenneth Gailbraith who noted There are two kinds of forecasters: those who dont

know, and those who dont know they dont know. Nowhere is this truer than in the stock

markets.

Despite the fact that it is almost impossible to do investors tend to give great credence to those

whose guess is right. Folk like Elaine Garzarelli, Robert Prechtor, and Joe Granville are just a

few of the pundits who made a lucky guess and were near worshipped by investors afterwards

Their record after their lucky guess can best be described as abysmal. In spite of this everyone

will carefully read their charts, plug 93 data points into their multi-factor forecasting model andissued well though predictions that are probably wrong.

If the forecasters were smart they would game the system and come out looking like they at

least had some sort of clue what was going to happen. 76% of the time the stock market will

close up on the year. Most of the time stocks will outperform bonds and small stocks will out-

perform larger stocks. The worst performing sectors frequently bounce the next year. Sector

momentum will frequently continue for several months into the New Year. Yu could use this

kind of simple statistical information to develop a forecast that makes a lot more sense than

most of the carefully thought out ones we will see in the next few weeks.

Since I write about the markets I am always asked to issue my year ahead predictions. Since I

do not make market predictions and have a firm policy of reacting to what the market actually

does instead of trying to guess what it might do I have developed a very simple way of win-

ning the prediction game. I just pick the four cheapest larger cap stocks on the planet and offer

them up as my best picks for the following year and predict they will be outperform the market

I t seems to work better than multi factor models and astrology as 2012 picks rise by a com-

bined 42% and 2013s are up a scorching 74% so far.

It has worked so far so I will stick with their approach. My first pick is quickly becoming one of

my favorite stocks. Porsche Automobil Holding SE (POAHY) is in reality just the holding com-pany for the Porsche family at this point. After they tried to take over Volkswagen (VLKAY) and

failed, Volkswagon bought out Porsche and the family was left with a 32% stake in Volkswagen.

Porsche Se Holdings trade at less than 70% of net asset value which includes the Volkswa-

gen stock and some EURO 2.9 billion, or almost $4 billion in cash. The plan to use the cash to

make investments in companies along the automobile supply chain, primarily of course selling

equipment to Volkswagen.

Tim Melvin, Banking on Prot



Korea Electric Power (KEP)is currently trading at a little less than 40% of its tangible book value

and is one of the cheapest stocks in the world right now. They are the only company currently

producing and transmitting power in South Korea and should benefit as that economy contin-

ues to remain relatively strong.

I have no way of knowing what silver prices will do next year but I do know that one of the

larger mining operations can be purchased at just 50% of its tangible book value right. Coeur

Mines (CDE) has silver and gold mining operations in assets located in the United States, Mex-

ico, Bolivia, Argentina and Australia. While I view this as more of a five year stock I will offer it

up in my 2014 prediction list as it si simply too cheap.

At 38% of tangible book value Royal Bank of Scotland (RBS) is one of the cheapest banks in the

world. Since the financial crisis the bank has been selling non-core assets and operations and

refocusing on its core lines of business. They recently announced that they were speeding up

their exit from US retail operations and putting remaining non-core operations and troubled

assets into an internal bad bank and just let them run off over the next few years. At this valu-

ation any company specific or economic news of a positive variety could turn this into tone ofthe biggest gainers of 2014.

I have no idea what the stock market will do next year. I do know that these four stocks are very

cheap compared to their assets and appear to be able to survive long enough to thrive.



As professional money managers (weve been managing OPM other peoples money for

more than 25 years), we dont employ a crystal ball in our approach. No, our game plan is

to stay in tune with what the market IS doing instead of trying to figure out what we think it

should be doing. As the late Marty Zweig used to say, Those who rely on a crystal ball are

likely to wind up with a lot of crushed glass in their portfolio. However, given that so manyinvestors were fooled by the bull move in 2013, lots of folks want to know what to expect from

the coming year. So, we feel obliged to take a stab at some prognostications.

Risk Management Will Be Needed in 2014:To be sure, the bulls are on a roll. But remember that

trees dont grow to the sky. After seeing severe declines in in each of the previous five years,

the bears were largely shut out in 2013 as the largest correction going into November had

been just -5.76%. However, history shows that the stock market experiences a severe correction

(defined as a drop of -10% or more) once per year on average. As such, we would encourage

investors to have a plan to manage risk during the New Year because at some point, the bearswill once again get their act together. Check out the chart below. Since it has been a while since

our furry friends were successful, the next correction might be well worth trying to avoid. If you

are looking for guidance on this front, check out our Daily Decision service, which is designed

to keep investors on the right side of the markets important moves. Or you can read our Risk

Manager Report on www.StateoftheMarkets.com which is free to all visitors and is updated

once a week on the site.

Dave Moenning, Daily Decisions



Stock Picking Will Continue To Work: After several years of being frustrated, stock pickers had a

great year in 2013. In short, we believe this will continue as correlations amongst stocks (how

stocks act relative to the S&P 500) have fallen, providing managers an opportunity to add

alpha via stock selection. One of our favorite alpha add strategies is to buy stocks that

corporate insiders (those who have to report purchases of stock in the company they work for

to the government) are buying but only when they are buying heavily. Weve been running a

portfolio based on this strategy since 2008 with great success and have discovered that thesestocks tend to follow a similar pattern. Youve likely not heard of most of these stocks, but they

can add serious alpha to your stock picking. See the chart below for a summary of what we

call the insider buying pattern.

To learn more about how to use an insider buying strategy, check out the Insiders Portfolio on

Marketfy.

No New Crisis Means No New Bear Market: Anyone who is new to investing in the last 13

years probably doesnt understand how bull markets work. Since 2000, the stock market cy-

cle has been bust, boom, bust. Thus, most investors are currently preparing for another 2008.

However, it is important to recognize that over the last 35 years, there have only been 3 BIG

bear markets (1987, 2000-02, and 2008). Point number two is that all of the really nasty bears

were a result of some crisis, an extreme overvaluation or an event. So, given that valuations

are fair, earnings are at record highs, interest rates and inflation are low, and the economy is

likely to improve, the bottom line is that unless we see an external event or a new crisis devel-

op, we are unlikely to see another big, bad bear for a while. Therefore, it will likely be best to

put your bull hat on and enjoy the ride. Oh and buy the dips along the way too.



On December 31, 2012, the S&P 500 nearly touched its 200 day moving average. Since then,

the macro US market index, which all investors should use to measure the health of our na-

tions economy, has grown over 26%.

To many, given the countrys unresolved monetary policy and debt issues, the recent growth

is unjustified. Many are calling for a top in the macro index and are looking for any reason topressure the index components that have experienced rampant growth in their valuations this

past year. The bulls, on the other hand, cite the decrease in the US budget deficit and the 33%

return in the midcap Russell 2000 as justification for the S&P 500s accelerated growth in 2013.

With that in mind, I predict that an event will cause the macro index to fall to its 200 day mov-

ing average. This will be approximately an 8% market correction, which will be good for the

markets growth in many investors eyes.

AAPL will break $600 easily. Carl Icahn can get more out of his Twitter feed than he already

has. He has sent NFLX from a sub $60 stock to one that hit an intra-day high of $389.16 after its

Q3 earnings report. Mr. Icahns recent Tweets, publicizing the activist investors push for AAPLs

CEO Tim Cook to support a $150 billion stock buyback, should only intensify the tech giants

current bounce back from its spring low after hitting an all-time high of $705.07 in September

2012. My prediction: after breaking its 200 day moving average in August, its 38.2% Fibonac-

ci retracement of about $508 (which coincided with breaking its high to low 1/3 Speed Line),

AAPL should make its way up to the 61.8% retracement of about $584 and find a way to break

through $600. Or at least have a party up there in 2014

Sang Lucci, Unlimited On-Demand Options Education



In the spirit of market corrections, the meteoric rise of NFLX in 2013 will be followed by a sharp

retracement back to its 200 day moving average in 2014. We saw this back in 2011 around the

same time US debt was downgraded by Standard and Poors in early August. If the debt ceiling

extension does not turn into a permanent fix in early January, NFLX may see a similar plunge,

especially after Carl Icahn recently tweeted that he exited most of his position in the content

provider. Time and congressional cohesion will tell



2013 we saw the real rise of the bull market. It was filled with bear traps but not much of any

correction. 2014 will bring the maturation of the bull as we move into the Mania Phase. It will

be filled with more media attention, enthusiasm, and greed as public (retail) money gets long

the equities markets. With Yellen at helm, well continue to see QE until Unemployment gets

under 5.5%. Unlike 2013, I feel well see a 10% correction, potentially another bear trap as we

gather more bulls...Well see 2-3 corrections in 2014 so be patient with entries and have cash to

buy them.

Stocks to benet:1. Tech names doing smart technology: GOOG, AAPL, AMZN . Things like smart TVs, Smart

Houses, Smart Cars, Smart Watches, etc

2. 3-D stocks mature - DDD, SSYS, PRLB

3.

2014 will bring more opportunity for traders.

Heres where I think we are with current cycle:

Vader Trader



4. Healthcare Technology will be huge - ATHN, EHTH, WAGE, ISRG - continued beneficiaries of

Obamacare

5. Food - CMG, SBUX

6. Investment Banks make a huge comeback.. good times for more IPOs, M&A - GS, MS

7. China Stocks - CTRP, QIHU, SFUN

8. Biotechs - REGN, BIIB, ALXN

9. Energy - CLB, EOG

10. NFLX - does a huge deal.. either with AAPL or GOOG

11. Last as the Bull Market matures.. Dow stocks will support the market with making more new

highs.



\My 2013 pick was TUES at $7.50 has doubled. For 2014, markets should melt up higher through

the first quarter of 2014 on ever decreasing overall volume. My top 2 picks for 2014 is ADEP

and CMLS.

SPX 1850 highs and sell-off accompany back down to 1500 by year-end. TSLA should be trad-ing back under $100. ADEP to $30 on growth of industrial robotics and thin 10 million shares

float.

Online gambling will be widespread and rake in more revenues for debit cards and PayPal.

GDOT should be acquired in the $50 range. EBAY to $80. Streaming media will continue to

see growth. ROVI back up through $30s as they enable WMT.

The price gouging by cable, wireless and broadband companies will see more cutting of the

cable. Broadband penetration will grow but there will be mass revolts against the rising costs

of programming and bundling, which will backfire on companies like CMCSK, VZ and T. I see20-30% price declines on those stocks. I see a comeback for terrestrial radio and even televi-

sion. CMLS to $10-15 as an owner/operater of 517 radio stations likely via acquisition.

Jea Yu, Scalping for Prots 1.0



Before digging into my top three themes for 2014, allow me to say the following; while I do see a

good likelihood of all three items to hold true for the coming year, I would be entirely remiss not

to mention that anything from major central bank policy shifts to major and unexpected geopo-

litical flare-ups can quickly change the landscape we currently see. Because of this, and as any

prudent trader has learned, I will keep my three themes in the back of my mind but will ride with

a lose grip on the handlebars because it makes for a smoother ride, i.e. will keep me from be-

coming stubbornly focused on these themes.

Continued stock rally improving economy

The US stock market as measured by the S&P 500 every fifteen to twenty years or so slips into

twelve to eighteen year long consolidation phases. These consolidation phases consist of ma-

jor cyclical bull and bear markets that offer great opportunities for many market participants but

punish those applying the buy (at any price) and hold (forever) attitude by at the very least bur-

dening them with major opportunity cost.With the onset of a new round of easy monetary policy in the early 2000s and the burst of the

internet bubble, the stock market ended a major secular bull market that had been in place since

the early 80s and slipped into a so called secular bear market. The rally off the 2009 capitulation

lows and subsequent break to new all-time highs in 2013 has all the makings of a beginning to a

new secular bull market. By breaking out of the thirteen year secular bear market, or consolida-

tion phase, the S&P 500 is likely on its way higher, much higher over the coming decade and a

half.

Serge Berger, The Steady Trader



More sector and stock selection necessary

Going into 2014 this new secular bull market will have been just about five years old and while

not all sectors rose equally off the lows, correlation among the sectors was fairly high, particu-larly in the first few innings of the rally. As the economic recovery comes out of its toddler ages

and begins to grow up, I am expecting to see more separation in terms of growth rates among

different sectors and particularly among different stocks. As such, stock picking will become

more important again to achieve good performance in the portfolio.

Slowly rising interest rates

Along with a new secular bull market in stocks I am also expecting a slow grind higher in inter-

est rates. Hyper inflation fear mongering in my opinion does not have much validity here as the

global recovery is still taking place at a slow pace. However in a recovering economy, as eco-

nomic activity picks up, consumer confidence slowly gets restored, and thus lending activities

accelerate, interest rates should rise if just to reflect the improving economy. For those lookingfor a target number for me, I would imagine the yield on 10 year US treasury notes to be some-

where around the 3.20% 3.50% mark toward the back-end of 2014.



2014 Stock Prediction: Stay with AMZN, unless . . .

I think most analysts will tell you A trend that is in force stays in force until that trend ends

(Dont fight the tape). However, sometimes when a stock continues to climb it can be difficult to

know when the ride might be over. I believe AMZN gives you a trend you want to continue to

ride while also giving you the line in the sand to know when that trend might be over.

You can see from the chart above that AMZNs trend is, and has been, up for quite some time. Id

expect this trend to continue unless . . . the current trendline of support breaks. If AMZN breaks

the uptrending support that it has created over the last few years the stock will most likely work

its way lower.

Stock Market 2014: The Bull Market Clock is Ticking

With the way the stock market has been rising since 2009, its easy to forget that all bull marketsend. When all you do is hit new all-time highs one can begin to think that the stock market cant

drop. Well, it can, and they always do. Although its impossible to know when a bull will end, we

can certainly see warning signs worth paying attention to when they appear. First, here are some

interesting stats:

Christian Tharp, 5 Star Trading Academy



Since 1871

Median bull market 50 months / Current bull 55 (as of 10/2013)

Average bull 67 months

Median return 124% / Current bull - 140%

Average return 178%

The stats bear out the fact that our current bull market is in the sweet spot of termination. How-ever, bull markets have obviously lasted longer. My concern is based more on what I see on the

chart of the DOW than anything else. Before looking at that chart, you most know what a Broad-

ening Top price formation is

The key points to take from the pattern above are that Broadening Tops (BT) tend to form afterstrong advances and are bearish in nature. Typically, resistance is only hit 3 times.


21/21

With all of that in mind, take a look at the DOW

Worried? Me too. Unfortunately, we wouldnt know that this BT is valid until 1,000s of DOW

points had been shed. In order for the pattern to be complete, the DOW would need to drop

a minimum of 9,000 points. Think it cant happen? Do you know how many points the DOW

dropped from October 2007 until March of 2009? Almost 8,000. Stay tuned.

2014 Bond Market: Watch US Treasury Yields

US Interest rates have been rising as of late. Weve heard about this from the media over the last

several months, but in reality, they have been rising since mid-2012. Is it because our economy is

getting stronger? Based on Federal Reserve policies, I doubt it. Others say rates have risen due toinflation fears due to all of the Feds money printing. And finally, others say the concern over the

US debt load is why rates have slowly inched higher.

Which of those is the case? Hard, if not impossible, to say. The real question is when do these

rising rates become a real concern? Look at the chart below and you may have your answer.

2014 market predictions ebook

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