Unusual Trading Signals Can Prepare You for the Next Sell-Off

Unusual trading signals in individual stocks have historically been able to forecast a market about to fall. These warnings also provide a heads-up for opportunistic entry points. On Oct. 12, we published an article saying we expected the markets should fall an average of 5.29% and that it should take an average of 13 trading days to happen.

This is very valuable for those on the sidelines waiting for a pullback in this multi-year bull market. I wrote about a threshold that had been triggered that historically precedes a big fall in the market. This provides an opportunity for patient investors because they can pick up stocks at a bargain. Because the signals are so rare, we pay close attention when they happen.

Chart showing the performance of the Russell 2000 after the publication of the article

The Bottom Line

Unusual trading signals can provide opportunity. Long-term investors can unemotionally use history as a playbook for success. Pullbacks and oversold markets have been great chances to scoop up great stocks. Our long-term view is bullish on the market, and we feel that extreme pullbacks offer buying opportunities for the long run.

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