Forecasting SP Closing Price for 2011

Here’s a simple model for forecasting the closing price of the SP Cash based on the coincident annual change in price of the 30 year Bonds and VIX. Since the annual changes for Bonds and VIX aren’t available yet, the annual change as of 12/6 was used as a proxy.

The Result? A 19% year-end increase in Bond prices plus a 62% increase in VIX results in an estimated year end change in SP cash of -11%.

Which would put us at 1119.29.

So, if you were wondering why the market felt a bit overbought given systemic unemployment, sovereign debt, anemic GDP forecasts and rising social and international tensions, this model helps explain why.

The end of the year and Q1 should be interesting,

 

–h

Henry Carstens

503-701-5741

 

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Here’s the regression model –

 

Call:

lm(formula = spcash ~ us30 + vix, data = d)

 

Residuals:

Min       1Q   Median       3Q      Max

-0.25085 -0.08012  0.01413  0.10983  0.18587

 

Coefficients:

Estimate Std. Error t value Pr(>|t|)

(Intercept)  0.06565    0.02611   2.515 0.016816 *

us30        -0.12277    0.10739  -1.143 0.260915

vix         -0.24405    0.06583  -3.707 0.000742 ***

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Signif. codes:  0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1

 

Residual standard error: 0.1439 on 34 degrees of freedom

Multiple R-squared: 0.3146, Adjusted R-squared: 0.2743

F-statistic: 7.805 on 2 and 34 DF,  p-value: 0.001624