S&P 500: In the Zone!

Nobody can predict where stock prices will go next, can they? Especially given the volatility of stock prices, especially in today's market, where the market can swing by more than 3% in any given day, right?

It's just not possible, is it?

To really find out, we ran a two-year long experiment, from April 2009 through April 2011, to see if we could forecast the average value of stock prices for a month at the end of the previous month. Here were our final results:

As you can see, we offered a split final forecast option for April 2011. Here's what we believed would happen instead:

What we believe is likely is that stock prices will track upward from the average level of 1304 they recorded in March 2011 toward the 1393-1429 level our primary method would forecast as the noise currently in the market subsides.

And that's what happened. In April 2011, stock prices did indeed track upward, rising to an average level of 1331 for the month, with the S&P closing the month at 1363.61.

We took the next several months off from offering public forecasts of where the S&P 500 would head next, but by 26 September 2011, we couldn't resist any more, and posted the following chart, which presents a graphical prediction that happens to cover the period through the end of 2011:

And here's what the updated chart looks like, through the end of 16 December 2011:

What can we say? We're still in the zone! And that concludes, for real this time, our public experiment in forecasting the future for the S&P 500!

New Jobless Claims: Still On Track

Today's news that the number of initial claims for unemployment insurance benefits being filed for the week ending 26 November 2011 ticked back up over the 400,000 mark is right on track with the prediction we published over a month ago.

Here's that prediction:

... since that slowly downward trending line is currently projected to stay above the 400,000 level through the end of 2011, we can therefore expect that there is over a 50% probability that the number of new, seasonally adjusted initial unemployment claims will be above the 400,000 mark through the end of the year.

In fact, what we can expect as we go forward in time is that we'll see an increasing number of times in the weeks ahead where the number of new jobless benefit claim filings will fall below the 400,000 mark, as the number of layoffs from U.S. employers each week continues to decline gradually.

Lo and behold, that's pretty much exactly what has happened so far in the time between 21 October 2011 and today, as shown in our chart below, which adjusts the trend line slightly:

For the six most recent observations of the number of new jobless claims, which cover the period of time since we made our prediction, three have been at or above the 400,000 mark, while three have been under.

We also see that the mean trend line has shifted to be slightly steeper, which suggests that the number of initial unemployment insurance claim filings each week will be more likely to fall under the 400,000 mark in the weeks ahead.

Meanwhile, Bloomberg reports that the uptick in new jobless claims is "unexpected":

Jobless claims climbed by 6,000 to 402,000 in the week ended Nov. 26 that included the Thanksgiving holiday, Labor Department figures showed today in Washington. The median forecast of 43 economists in a Bloomberg News survey called for a drop to 390,000. The number of people on unemployment benefit rolls and those getting extended payments increased.

Whoops! There's 43 economists whose forecasting ability is now in doubt, which is a shame because the number of new jobless claims filed each week is perhaps the easiest of all economic data to forecast while its basic trend is intact!

And at present, it appears that the current trend for weekly new jobless claims remains well in force.