You do not need to buy, hold and forget about your equity investments. Why would you suffer through stock market corrections and bear markets and watch your account statements go down when you can get out near stock market tops and get back in near stock market bottoms?
EquitySurge™ will tell you when you should invest in the USA stock market and when you should not. There are clear times to be invested in the market, and other times when you should be in cash. Yes, you can time the market.
EquitySurge™ tracks liquidity conditions in the stock market. Liquidity means the same thing as money. When money is flowing into the stock market, you want to be invested; when money is leaving the stock market, you want to be going to cash. In order for prices to go up, the stock market depends on money flow. Without money pouring into the stock market prices cannot go up for very long, and if the lack of liquidity continues, prices will certainly fall. If you track the flow of money into and out of the stock market, you will know when it’s time to invest and when it’s better to be in cash. EquitySurge™ is constantly looking at various measures of money flow and will tell you when liquidity conditions are positive for stocks and when they are not.
EquitySurge™ is optimized to help you invest in the broad-based USA equity markets, not individual stocks. Over the long run you will be more successful with your investing owning the major market indexes when EquitySurge™ gives a buy signal, and going to cash when EquitySurge™ gives a sell signal, rather than trying to buy and sell individual stocks.
When EquitySurge™ generates a buy signal it means that liquidity conditions for the stock market are or soon will be supportive of higher prices. You should begin to build a position in the stock market by buying index ETF’s like SPY, which tracks the performance of the S&P 500 Index for a very low cost, or other index ETF’s that track other major equity market indexes such as the Dow Jones Industrial Average, Russell 2000, Nasdaq, etc. You could also buy low-cost equity index mutual funds from Vanguard and others. EquitySurge™ is not designed to help you trade or invest in individual stocks.
EquitySurge™ will help you buy low and sell high, which is something the vast majority of investors are never able to do. Most investors buy high and hope for higher, or if they do manage to buy low, will end up not getting out at or near market highs, but instead will then have to endure corrections, sell-offs or even bear markets.
If you could consistently buy low and sell high, then at times when the market has corrected you will have plenty of cash on hand to reinvest at or near market lows and ride the market higher again. And conversely at market highs you will be taking profits to lock in your gains by selling and moving to cash.
There are two main emotions that rule the investing landscape: Fear and Greed. After steep corrections or especially after bear markets, most investors are frozen with fear and will not buy at the resulting market lows. Instead most people will wait and say to themselves, “Well, I’ll get in when the market comes back down again.”, which invariably never happens, so you are left with buying well after the market lows and hoping the market keeps going higher so you can make money.
The other emotion is Greed. At or near market highs or tops the vast majority of investors will ignore any signals to sell and take profits, but instead will continue to hold believing that prices can only go higher. This usually results in investors missing the opportunity to sell at or near price peaks and then having to endure sell-offs, corrections and even full-on bear markets because they were too greedy to take profits back at the market top.
And Wall Street knows this all too well. Have you ever noticed that as stock prices continue to go up all you hear is “keep buying because multiples are expanding”, or “the market is willing to pay more”? Opposite but similar things are said at or near market bottoms: “The economy is going to collapse”, “stock prices are heading much lower”, things like that.
If all you do is pay attention to the major market news sources you will be scared away from buying market bottoms and talked out of selling market tops.
EquitySurge™ tracks liquidity conditions in the stock market. When a buy signal is generated it means the time is right to start buying equities and building a position. EquitySurge™ will give you the signal to go long the stock market, and typically it will give you anywhere from a few days to a couple weeks time window to get in. Prices may still be bottoming during this period so you will have a good opportunity to get in near market lows.
When EquitySurge™ generates a sell signal it will represent a time and price window from which to take profits and sell out of the market before a major downturn, correction or even bear market ensues. Prices may still be peaking during this period so you will have a good opportunity to get out near market tops.
EquitySurge™ is not a day-trading tool, it is a signal designed to tell you when you should be investing in and holding equities, and when you should not. The buy signals will last anywhere from a few weeks at least to a few months or longer. And when a sell signal is generated you should expect to be out of the market for possibly some time, maybe weeks or even months.
We use RRG® graphs to show the relative strength and momentum of a group of liquidity benchmarks versus broad-based USA stock indexes. When the liquidity benchmarks show strong relative strength and momentum they appear in the green Leading quadrant. This means liquidity conditions are favorable for establishing and holding long equity positions. As the relative momentum of the liquidity benchmarks fades, they start moving into the yellow Weakening quadrant. If relative strength also then fades, they move into the red Lagging quadrant, which means that liquidity conditions are now unfavorable for holding long equity positions, and stocks should be sold or even shorted. Finally, when momentum starts to pick up again, meaning liquidity conditions are improving, they shift back into the blue Improving quadrant.
The liquidity benchmarks we use are the VIX Index, the Chicago Board Options Exchange’s CBOE Volatility Index, a popular measure of the stock market’s expectation of volatility based on S&P 500 index options, the Hang Seng Index in Hong Kong, an excellent benchmark for global liquidity conditions, HYG, a high yield bond ETF, TLT, a 20+ Year US Treasury Bond ETF, and the commodity Copper, an excellent barometer of global industrial economic activity. Each of these provides deep insight into current liquidity conditions in the stock market.
The Relative Rotation Graphs are provided by StockCharts.com, Simply the Web’s Best Financial Charts.
The terms Relative Rotation Graph and RRG are registered trademarks of RRG Research.