May 2014 Forecast -- A small step down

The summer months are here and the forecasting model expects the U.S. stock market to perform distinctly below average, declining slightly from May through October 2014.

Probable market gain from 5/1/2014 to 11/1/2014:    -3%  (Average since 1984: 4.8%)
Probability of at least breaking even :    46% to 57%  ( Average since 1984: 73%).

(Click on image to enlarge.)

For the most recent completed forecasting period, September through April, the model did well. It had forecasted an 8% gain in the market (measured via the Value Line Arithmetic Index) while the actual gain was 6%.  For the past year the market has generally turned in better than forecasted gains.

Hopefully that strong relative market performance will continue.  Unfortunately, in the past few months the market has stalled as the model had expected.  The overall market has been flat, but the key technology and cyclic sectors have turned south.