During times when the market is seemingly in free-fall and all your stocks are going down, it is easy to let emotions take hold and lose the proper perspective. In order to help avoid these pitfalls, our Bespoke Market Timing Model analyzes a series of forty widely (and not so widely) followed market indicators to see what they are telling us about the market. For each indicator, going back at least six years, we isolate all of the prior occurrences where the indicator was moving in the same direction and stood at similar levels as it does now. We then calculate how the S&P 500 performed over the next week, two weeks, and month following each prior occurrence. After running the numbers for each indicator, we calculate an overall outlook for the market, which is included in each night's report for Bespoke Premium subscribers.
As shown at the top of this post, on Monday our Market Timing Model hit its highest reading ever (click the thumbnail image to view the report). Historically, high readings in this indicator signify an oversold market where conditions are favorable for a short-term rally. Whenever the model reaches these high levels, all it needs is a spark to get things going, and this morning that spark came in the form of the Fed's liquidity injection plan.
So the next time you feel like stocks are going to fall of a cliff, before making quick decisions, check to see how your emotions compare to what the market is telling you. The Bespoke Market Timing Model is available to Bespoke Premium members on a daily basis.