Daily Wealth

About the Author Daily Wealth

In a nutshell, our investment philosophy here at DailyWealth is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. So our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. We believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

A 92% Chance Stocks Are Higher in Three Months

“Stocks have not yet tested the panic low from late August.”

That’s the big market news that no one is talking about, according to our friend Jason Goepfert of www.SentimenTrader.com.

Jason notes that stocks not testing their recent low is rare – it has only happened a dozen times since 1950. Importantly, it’s a positive sign going forward…

“When we’ve gone three weeks from a low without coming within 1% of that low, it typically led to even more gains over the next several months.”

We can’t share Jason’s exact research – that would be unfair to his subscribers. But what we can tell you is this: three months after this rare anomaly, stocks were higher 11 out of 12 times – or 92% of the time.

The average gain was 5.2%. That might not sound like much… But remember, these are three-month returns. And those gains came consistently, with only one losing observation.

Of course, we can’t make our investment decision based on one single indicator. But this is one of several we’ve seen in recent weeks that points to a continuation of the current bull market.

(I recently told DailyWealth readers about another reason stocks could move much higher right here.)

We can’t know the future. But history continues to line up in our favor. Indicator after indicator continues to show more upside is likely in U.S. stocks.

The recent decline has shaken most investors. After four years of uninterrupted gains, most of us forgot what a correction feels like. But this is normal. And indicators like this one make me believe we’re NOT at the start of the next bear market.

I could be wrong, of course. And that’s why we always recommend using – and following – stop losses on all of your investments. This will limit your risk no matter what the outcome is in stocks.

However, Jason’s research is clear.

Stocks haven’t tested their recent six-month low. And that points to higher gains from here. This indicator has been right 92% of the time since 1950. And it’s one more reason I believe the bull market in stocks is far from over.

 

  • Scott Matusow

    Another guy who simply has no understanding of what leverage is and how it relates to liquidity.