Our Intermediate Trend Factors have turned negative. Our Long Term Reversal Factors remain negative.
The current combination is on average negative for the stock market and historically the stock market has produced a negative return. It also encompasses the 1929 crash, most of the 1973-74 bear market, 1987 crash, most of the 2000-2002 bear market, and most of the 2007-2009 bear market.
The Trend turning negative with this type of recent decline is going to make the normal range of short term outcomes even more extreme. The market could produce a relatively strong rally that we would expect to fail as long as the Trend remains negative. However, the market could also fall significantly further. So it is important to reduce market exposure even on this type of decline. Our Ideal Stock Market Exposure has been lowered to 0%.
