… if I understand it correctly, it just triggered - for the NYSE (top line started to drop in the chart).
SPX edged towards a new high this year so it will take a while longer for that index.
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I forgot the rules. Can you tell me in or out?
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From memory, sell if the index doesn’t make a new high for 99 days, to avoid the worst of a possible bear market.
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I also heard: ‘a bear market starts with a whimper and ends with a bang’ while ‘a correction starts with a bang and ends with a whimper.’
We apparently got a correction in April. But that doesn’t mean the bear is not coming later on this year. A recession might.
Inflation will be.
We also recently inverted (again).
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Dear TJ,
You have covered all the bases.
We started with a bang. Didn’t 1929 as well?
We get deflation because of the great depression brought on by the tariff war. Unemployment is going to soar.
My recollection is that this was only studied for the SP500. Not the NYSE or any other index.
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What are you referring to here? The traditional measure of 2-10 is not currently inverted. The 3 month is a bit higher, but most expect it to drop in June when the Fed cuts rates (63% chance right now according to fedwatch).
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started to invert at the end of March…
As of today, it is below 40%. It dropped 15% overnight. I expect it to be lower next week after todays job report.
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Yep. It dropped from over 70% to just over 60%, and now after the jobs report (that shows no large issue at the moment) it is 36.7%. The “people” (those who use real money to trade interest rate futures) are now convinced that we aren’t likely to see a June rate cut. For July, they still think 79.8% chance of a rate cut.
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The new TMF board format wiped out my saved file of pithy, thought provoking posts by mungofitch about his 99-day rule, short term bottom detector and major bottom detector.
I did a search for any remnants on the TMF Mechanical Investing board and found the following that appeared back in May 2022 at the same time when WendyBG posted
“mungofitch 99-day rule” triggers
The “mungofitch 99-day rule” is a historical model developed by the eponymous mungofitch which shows that IF the S&P 500 does not make a new high in 99 trading days it is likely to fall further…sometimes much further. By selling all stocks and going to cash, the nasty bottoms are cut off these drops. This model recommends going back into stocks after 99 trading days of making new highs since that usually indicates a durable bull market. The waiting period cuts out dead cat bounces and head fakes in a bear market.
May 2022
Simple detector ‘Minor Bottom’
In response to the OP author’s comment that the Simple Detector, regarding the NYSE, signaled a ‘Minor Bottom’ on 5/2/2022, mungofitch commented:
My short term bottom detector also triggered yesterday May 2.
It has degrees of certainty…this was not a super strong signal.
For example, not nearly as strong as its signal 2022-02-24.
So at this point it’s more like a whining dog, not a barking dog.
My usual comments on this signal:
It’s usually pretty good for positive average returns 1-4 weeks out.
It often triggers multiple days in a row.
It’s not nearly as reliable as my relatively rare “major bottom” detector signal.
In response to a question, Does your bottom detector trigger independently of the 99-day signal?, mungofitch stated:
Yes, totally independent signals because they look at different time frames.
Remember that the 99 day rule is just a particular tuning of the general observation:
The longer it has been since a fresh recent high, statistically the lower the forward return in the next couple/few months.
It’s a gradual roll-off, not a bright line thing.
An old post with some figures.
https://discussion.fool.com/a-new-sampp-high-so-the-99-day-indic…
That table is worth pondering.
Those are 6-month forward average returns, a little bit longer time frame than is generally used for timing signals.
But still, you can see the gradual roll-off with the time since high.
So there is no specific cutoff that is magical. It’s a “broad sweep of history” view of the markets: short delay good, longer delay bad.
It’s attempting to answer the question: “Is there some evidence that you are still in an ongoing bull market?”
Longer time frames are bad, so you have to pick a useful cutoff. The 99 day level was my chosen compromise.
A person who’s bullish by nature might pick three months. A very conservative investor might pick six months.
This helps explain why you can have a bottom detector when things are bullish in that view, or when they’re not.
The bottom detector is a much more short term “pick a particularly good day to buy” thing.
My short term bottom indicator is a reasonably good omen for 1-4 weeks.
That might happen in a bull or in a bear.
By contrast:
The major bottom indicator, if I’m being braggardly, is much more solid: when that happens, just go buy something, dang it.
Last signal dates were this cluster:
2020-03-17 (borderline)
2020-03-18 (borderline)
2020-03-19 (borderline)
2020-03-23
Average S&P close on those four days: 2426, average one year no-div nominal index return: 34%.
Last signal before that was this cluster:
2018-12-20 (borderline)
2018-12-21
2018-12-24
2018-12-26
Average S&P close on those four days: 2393, average one year no-div nominal index return: 63.5%.
So, the 99 day signal is the climate. Is it still summer?
The short term bottom detector is today’s weather forecast. Is it likely to be sunny in the next week? (up to a month)
The major bottom detector is: is today likely to have been about the coldest day we’ll see in the next 6-18 months?
Jim
——————————-
In response to another question, “How’s your major bottom predictor? You know, the one that I ignored in March of 2020…”, mungofitch posted:
Getting close to a signal.
Being an inveterate overtuner, I have a multiplicity of models.
The traditional major bottom detector hasn’t triggered yet, but it getting quite close.
A couple of spectacularly horrible days would do it.
But, for no reason at all, I think we won’t see that yet.
But my rarest and most strict short term bottom detector has triggered, both yesterday and today.
(the extreme end of the short-term-bottom model’s outputs, so it’s edging towards behaving like the major bottom signal)
It has signalled on only 164 days since 1966, and most of those are clusters, so it’s pretty rare.
Last few signals:
Two this week.
One in March 2020, one year forward 67%.
Three days at Christmas 2018, one year forward averaged 35%.
And oddly, a collection of 10 days in October 2018. One year average forward return only about 9%.
All of the short term bottom detector variants are giving their strongest signals yesterday and today.
They generally portend a higher market level 1-4 weeks out.
On average, returns are slightly higher than average even 3-6-9-12 months out from those signal days.
————————————
I highly recommend reading the entire thread.
Many here already know, Mungofitch no longer posts at TMF … his last TMF post was on 9/29/2022.
Regards,
Ray
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If you would like to read new Mungofitch’s posts, he posts on https://www.shrewdm.com/
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The US is being economically locked out in the cold. Europe is turning to China for EVs. The EU is changing their requirements to let the Chinese EVs in. The Europeans are turning to alternative energy to stop using US fossil fuels.
We are losing on all fronts economically and business wise.
The one solution is to raise the corporate tax rate. Nothing else will work. Everything else will compound the damage.
We do not have the intelligence to get anything done.
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Does the indicator say to sell now or to buy now?
Here’s the latest by mongofitch via the Mechanical Investing board at shrewd.com
OP comment:
My “major bottom” detector did not trigger yesterday April 3. It is pretty rare.
The companion “minor bottom” signal, much more common, did trigger.
—————————————-
On 04/29/2025, mongofitch posted this follow up reply:
The major bottom detector didn’t trigger.
The “newer major bottom” signal isn’t really as good as the classic, it’s really just an extra strong version of the minor bottom. (confused yet?)
So here is a recap of early April
2025-03-28 No signal
2025-03-31 Minor bottom signal
2025-04-01 No signal
2025-04-02 No signal
2025-04-03 Minor bottom signal
2025-04-04 Minor bottom signal
2025-04-07 Strong minor bottom signal (could be thought of as a newer/worse major bottom signal)
2025-04-08 Strong minor bottom signal (could be thought of as a newer/worse major bottom signal)
2025-04-09 Strong minor bottom signal (could be thought of as a newer/worse major bottom signal)
2025-04-10 No signal
2025-04-11 Minor bottom signal
2025-04-14 No signal
The market was lowest on the 7th, and the lowest close was the 8th.
So, on the theory that you want safety, you’d be buying the first day there was NOT a signal, which would be April 10. It is generally quite evident well before market close.
The US market is up 5.7% since the close on the 10th, so far. Usually the one-month-forward returns are good after such a signal. On average, anyway.
———————————————-
But what caught my attention in the above thread was the following comment in a 04/05/2025 reply:
I sold about 96% of my US stocks a couple of weeks ago, and sold all the US dollars too. It’s a personal thing, but I would not visit the US if you paid me. Everyone I know has cut back their patronage of US retailers and goods by, say, 30-50% or more. My point is that it seems likely that I and my acquaintances are not the only ones in the world with that stance, and it seems unlikely to change within a decade. From a macro point of view, what are the possible consequences for US equity prices? Never rule anything out.
=================
For those unaware about this, here’s mongofitch’s 03/17/2025 OP revelation on another board - Living Abroad:
Mungofitch OP: OT, out:
Since I have often posted sundry trades I’ve done, I thought I’d pass this along.
I’m divesting from the US. I’ve already sold all my T-bills and sold (so far) 96% of my US stock positions including everything in my quant portfolio. I’ve converted the existing US cash to other currencies, and will convert the rest after trades settle.
I still have some derivatives, most of which I will let run off in an orderly way. And a couple of stock positions that I’ll ease out of.
I’m in the process of opening a brokerage account with a Europe-based firm, planning to move assets out of my current one whose parent is in the US.
———————————-
In a 03/17/2025 reply post, mungofitch addressed the following:
Does that include Berkshire?
Honestly I’m not sure. I have not been net long for quite a while, so in that sense there’s nothing to sell–it’s more of a question of whether I’ll buy any the next time it’s cheap. I suppose it depends how my hunt elsewhere goes. There are other companies out there. Today I was reading up on Investor AB.
Can you please provide your reasoning?
Is this an act of protest, or a decision based on information you’ve obtained.
It’s not an act of protest as such. Who cares if I storm off in a huff? : )
I don’t want to start any flame wars, but two reasons:
- The US has moved too far along the spectrum of being uninvestable, like China. Not a stable regulatory/tax environment, capricious changes in the financial landscape, massive holes in the rule of law. (I suspect that the zone has been flooded sufficiently that some pretty dire developments have escaped the notice of many). That means an unacceptably high risk of unacceptably bad outcomes unrelated to the businesses themselves: wealth protection.
- The US is no longer an ally, but is now either adversary or enemy of Canada (where I’m from) and Europe (where I live). In the same way that I wouldn’t invest in Russia, I no longer think it’s honourable for me to invest in the US. I’ve done many dishonourable things in my life, but I’m trying to cut back. I don’t think it’s cool to fund one’s adversary’s government or economy.
Even US Treasuries? Seems rather dramatic…you must have concluded the US and its government are done for.
Not done for, that’s a bit harsh. But for non-US-persons, the #1 risks are getting pretty plain. You may or may not be aware of moves to curtail inbound investment via taxation of portfolio flows, and (separately) talk of forcible conversion of US debt to non-redeemable perpetuals in some circumstances. Plus many things not already on the policy plate but all too plausible…For non Americans, is there a 1% chance of (say) a huge withholding tax on T-bill redemptions that are not rolled over, or withdrawals from US brokerage accounts, or punishing withholding tax on sales? Would a US brokerage one day be asked/forced to apply some rules that might not be lawful under US law? Note that there is already a rule that if a non-US-person sells shares of a listed LLP, the entire sale proceeds (not the profit) are subject to 10% withholding tax which is (in my case) non recoverable. Buy $100 worth of Sunoco, sell at $105, lose $5.50.
I think that is a wise move Jim.
Actually I expect to be poorer as a result with fairly high probability. But perhaps a small chance of avoiding greater disaster?
Would you be willing to share what brokerage you decided to use?
I’m looking at Saxo, HQ in Denmark. Looks pretty good. For expats, Perplexity recommended them as the best alternative to IB : )
…Financial Reasons:
- Risk Assessment
- Profit Taking
- Currency Fluctuations
- Investment Strategy Shift
Tax Considerations:
- Monaco’s Tax Environment
- Estate Planning
Personal Factors:
- Relocation or Lifestyle Changes
- Liquidity Needs
- Geopolitical Concerns
Not profit taking, currency fluctuations, investment strategy shift, Monaco tax environment, estate planning, relocation, liquidity. Leaves only risk assessment and geopolitical things. The latter is one inescapable factor in the former, in much the same way that growth is an inescapable factor in assessing value. Sometimes the key thing in assessing prospective return on capital is assessing return OF capital. And, like cigarette making, there are legal ways to make money which I choose not to avail myself of.
04/21/2025 Mongofitch’s final reply in long long thread:
I’m divesting from the US. I’ve already sold all my T-bills and sold (so far) 96% of my US stock positions including everything in my quant portfolio.
…
Your ability to time the market top, not only as a theoretical speculation, but actually taking action - is pretty astonishing. Your post was on 17 March 2025, and the S&P500 was peaking (the market peak one extra trading day on 19 March).
Your exit (or at least, your post): S&P600 = $611
Today: S&P500 = $504
Associated gain (from underexposure): 21%
Comments:
- I am unfortunately unable to predict the future, but it’s always better to be lucky than smart
- The returns (avoided losses) have actually been a fair bit better than that, as I converted all my USD to non-USD currencies at about the same time, and the US dollar has fallen 3.9% since then : )
- To further bolster point (a) above: I opened up a pretty big new position in a non-US stock on April 3, just before a certain US announcement that had some adverse economic ripples. Oops.
Jim
=============
I’ll end my post, quoting Jim: “From a macro point of view, what are the possible consequences for US equity prices? Never rule anything out.’
Regards,
Ray
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thanks for the summary!!
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