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Is The Economy Vulnerable To A Fall Or Shock?
The market has stretched itself and has gone a little too far. So I won’t be surprised if in the short term we see some notable correction. However, that’s not what this model predicts. Its not a combination of leading indicators. It’s a warning indicator. If the score gets too high, it suggests that things are too rosy and may not remain the same. The score 13% was hit just 4 times since 1959: first in November 1980 when S&P fell by approximately 15% in 10 months, second in September 2000 (S&P declined by 27% in 12months), third in September 2005 when it didn’t exactly work and S&P kept increasing and last in June 2007 (S&P declined by 50% in 20 months).
So basically its not perfect as it did give a score of 13% in September 2005 but it did not work. However, it worked indirectly as it built up and then the decline was extreme.
Oct 3 03:45 PM
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