Last Friday, we got the mother of all “Kickstarter Signals” as eight stocks closed higher for every one that closed lower.
Historically, this suggests we could see a stronger-than-usual rally over the next few months.
You see, Harry’s research has been forecasting a major downturn for quite a while now. But even though we’ve long warned of the bearish market to come… we’re also opportunists! We like to make money any which way we can… in up and down markets alike.
So while stocks have further to fall in the long run, there’s also a good chance they’ll rally strongly in the short run.
I know… it’s frustrating when the Magic 8-Ball doesn’t give a clear answer. But that’s how the markets go. And it’s our job here at Dent Research to help you navigate both the short run and the long run.
Our Boom & Bust portfolio continues to hold mostly bearish positions (geared toward long-term trends). And our trading services, like Cycle 9 Alert and Forensic Investor, aim to exploit those shorter-term trends, such as the one we’re likely facing.
Now, let me put Friday’s massive wave of buying activity into context.
Typically, a Kickstarter ratio of four-to-one (meaning, four stocks advance for every one stock that declines) is a pretty strong signal. So last week’s eight-to-one ratio is very rare, and also very telling.
Take a look at how the S&P 500 has historically performed after Kickstarter Signals, relative to the market’s average gains.
As you can see, a Kickstarter signal of six-to-one or higher (as we saw on Friday) has historically signaled average gains of 1%, 2.9% and 4.4% over the following one, two and three months respectively… well above average!
Does that mean I’m recommending a total shakeup of our Boom & Bust portfolio?
Absolutely not – because Boom & Bust is geared for long-term investors.
But it does mean there are good opportunities out there over the next few months, if you have a proven strategy that’s able to ferret them out.
Adam O’Dell, CMT
Chief Investment Strategist, Dent Research