Here is his first post in it’s entirely. Some good news on a major bottom.
As some may be aware, one of my hobbies is building models to predict the stock market. It’s not something that can be done with reliability, but I find it’s not too hard to do somewhat better than a coin toss.
I have two models for spotting market bottoms. One aims merely to spot short term bottoms, the sort of day that is “one of the better moments this year to be a buyer”. It generally leads to pretty good returns on US markets in the subsequent 1-4 weeks. It also gives a degree of confidence…sometimes it’s more certain than others.
It’s recent pronouncements:
2022-09-23 strong “short term bottom” signal
2022-09-26 strong “short term bottom” signal
2022-09-27 weak “short term bottom” signal
2022-09-28 silence
2022-09-29 strong “short term bottom” signal
2022-09-30 silence
The other model is a “major bottom” detector. It’s signals are quite rare, but often quite useful. Occasionally it is too early, giving buy signals several times on the way down during a really bad market tumble. This was really only a problem in 1974 and 2008. But other than those stretches, usually the signals are pretty good.
The other catch is that it often signals several days in a row, so the safest interpretation is to wait for the first market day that it does NOT signal. This signal triggered on Sept 29, but not Sept 30, so (to the extent that it has any value) the US market is a buy now. The market might tumble some more, but it’s usually quite a bit higher a year after such a signal. If you were to buy after the first “no signal” day after a signal day, on average the S&P 500 is 12% higher 6 months later, 21% higher a year later, and 36% higher two years later. Not adjusted for dividends or inflation.
It’s far from perfect, but if I had some short term short market positions, I’d close them.
Charlie
