The concept of a market indicator or market timing tool isn't a new concept. While compounding is THE most power force in investing, market timing tools come in a close second. As the old saying, "don't tell me what to buy, tell me when to buy".
Our team has developed a proprietary market timing tool which we are calling NLO Market Score. In its simplest form, the tool assigns a score ranging from -6 to +6 to the market and is similar to market breath.
For example, the market score reached -6 on March 12, 2020 when the S&P 500 was at 2,481. Since then, the market have risen nearly +50% in less than a year.
However, the 2008 bear market pushed the score to -6 early in October thus leaving little upside if you did a one time purchase. No single (or multiple) market indicator will be accurate enough to call market bottom and that goes for ours as well. That being said, we've back tested the indicator with a reasonable success rate which we define as any positive return.
Below, in table A, we have summarize the outcome of purchasing the S&P 500 when market score reaches -6. In table B, we show the details of the trade/transaction.
Table A:
Table B:
A close observation and you will notice that there are purchase dates within days of each other. To adjust for that, we have taken only the first indication that occurs within that year. The result are summarized in tables C and D.
Table C
Table D
As a long-term holder of equities, we are pleased with an extreme high success rate coupled with above average (>10%) annualized return.