UBS: 3 POSSIBLE SECOND HALF SCENARIOS
In a recent strategy note UBS technical analysts laid out three possible second half scenarios. Which one are you betting on?
Scenario 1 = Trading range between 1,010-1,040 and 1,131-1,150Probability = 40% (increases to 50+% on failed breakout)This Neutral call is the street consensus view. Investors lack the conviction to commit aggressively to marketplace (i.e., either net long or net short) creating a choppy trading range market. Increases to 50+% on repeated attempts to breakout above 1,131-1,150.
Scenario 2 = Correction resumes leading to a marginal new low (950)Probability = 30% (increases to 40% on confirmed breakdown)This defensive call is based primarily on the fear of tail risk. Bearish camp points to the unresolved sovereign debt problem in Greece, repeat of May 6th flash crash, China slowdown, double dip recession, and geopolitical events around the world. Probability increases to 40% on confirmed breakdown below key support at 1,010-1,140.
Scenario 3 = Market melts-up to marginal new highs (1,220-1,250)Probability =30% (increases to 40% on breakout & falls to 20% on breakdown)This is the contrarian view on the Street. Breakout above key supply at1,131-1,150 increases the probability to40% as sideline money and shorts are forced back into marketplace. This breakout also negates a large 10-month head/shoulders top, confirms a 4-month head/shoulders bottom, and validates the July 1st low of1,010.91 as a Mid-term Election Year bottom.
Source: UBS
Classic. It might go up, it might go down, it might stay the same. Thanks UBS.
if you’re looking for someone to tell you exactly what the market will do, then turn on CNBC (of course, they won’t be right, but they will be definitive!)
Classic. It might go up, it might go down, it might stay the same. Thanks UBS.
A 4th scenario that seems popular in the comments sections of financial blog, i.e. Dow 450 or whatever low number you can think of, gets 0% odds in UBS’ assessment.
I’m in the first camp myself (choppy trading range), and have been some time. But it makes nervous to see that this is supposedly the consensus view (I have been under the impression that the bearish second scenario was the consensus view), as the majority is often off the mark.
Basicly we learn nothing ! No wonder considering the recent UBS story.
Whose forecast do you tend to believe the most ?
Scenario 4
Scenario 3 is a fakeout just like 2007. All cycle maniacs – 10 year, Presidential, 4-year, 2-year, call a moonshot to Dow 13000 in 2011 (remember CNBC predictions of Dow 16000 in 2008), instead we enter a new bear phase and see new lows by end of 2012.