I can see it now. The first good week the market has, there will be a slew of headlines using the same words but making very different points. Version one: “The Market Is Turning Around!” Version two: “Is the Market Turning Around?” Which one is right?
It’s going to take more than a week for the market to turn around. So, right away, you’ll know that a market revival isn’t a done deal. After one good week, it’s very possible the market will head down again. That’s only bad if it goes down further than its previous low. If it doesn’t, that could be a sign that the market is recovering.
But before you jump back in, watch for it to go back up. If it goes higher than its previous high, that would be another good sign.
To make sure the market has indeed turned around, it should make higher lows and higher highs two more times. Now, in order to lock in your conclusion that the market has reversed directions, do a Google search for ISM (Institute for Supply Management). Find their latest readings for the manufacturing and service sectors. If they’re both over 50, it means both are expanding.
That’s all there is to it. It’s not right 100 percent of the time, but it’s 100 times more reliable than trying to make sense out of the latest hysterical/euphoric headlines.[Ed. Note: ETR’s Investment Director, Andrew Gordon, is the editor of INCOME, a monthly financial advisory service that uncovers income-generating stocks that promise safety (first and foremost), along with much-higher-than-average profit potential.]