GDP and Michigan Sentiment Reports Have Had a Bullish Impact on Equities in Recent Months

There is a central tendency for GDP reports and Michigan Sentiment surveys, when reported on the same Friday, to be bullish for the stock mkt. This 1-2 combo happened on Friday, July 30 and again on Friday Aug 27 and introduces a trading bias to the upside with all trade above the overnight low at 1172. The bias is strengthened by the fact that equities tend to go bid into FOMC meetings, one of which will be next Tuesday. The election will follow on Wed Nov 3. EP 240

Today is Friday Oct 29. The behavioral model I am looking at on the chart below shows the July 30 low finding support on green 120 bar moving average (roughly the 18 day average used for some cycles). This is precisely what supported the SP500 this morning on the GDP report that came in as expected. If the SP500 behaves similarly to the 1-2 GDP/Mich Sentiment combo for the next few days, we'd expect the SP500 to double top on the year at 1217-1218 by Wed Nov 3 elections. You may recall that the August 5 high was a double top on the June high. Then we experienced the “August Swoon.” A rally into the year high by Wed Nov 3 will reintroduce a short term bear bias.