An econometric data series that has foreshadowed portions of the largest, U.S. centric market declines has been the use / movements of the LEI . Undoubtedly, the economy ( underlying components of the leading index ) has an important relationship to earnings and stock prices, probably MUCH more than movements of HFT traders ( who may be able to move the market temporarily ). The use of a moving average heuristic ( trend following measure ) has helped with mechanical reentry / tilting back towards higher allocation of equity based assets. Both are objectively derived, non revised measures that together, have produced non trivial results towards risk management.
tinyurl.com/n2ouhr4 ( paste links into browser address bar )
tinyurl.com/lfx7zhh
Another variable that has shown statistical persistence in forward year predictive analytics, has been the strength of the 1st quarter returns of the S&P500. In 24 out of 25 occurences since 1951, the market has been higher 1 year out when the 1st quarter S&P500 return > 5%. None of these occurrences have had direct implication with the negative LEI periods shown. 1st qtr of 2017 = 5.7% ..
From a tactical perspective, decent and meaningful equity market returns may be had by proper asset class selection, the growth of assets within a tax deferred account ( a Roth IRA is a good start ), and the avoidance of and protection of capital from a "portion" of the largest significant market declines. One doesn't have to try to get out at the top most or get in at the bottom most 'ticks", or try to trade every little squiggle.
As the S&P500 has had positive annual outcomes 73% of the time and negative / flat outcomes 27% of the time ( since 1951 ), a decent tactical system based on long term time frame, may be invested in equity based asset some 85+% of the time and allocated to "defense" 15+% ...
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- Don't quit your day job
- Don't use leverage
- Open a Roth IRA
- Sometimes money is made by sitting in cash
- Don't be a hostage to the markets
- let the markets, profitability of the world's economys work for you