What Are Long Term Indicators Saying About the Stock Market?
Below, we have grouped and combined several long term indicators for stocks. The combined signal on the top right is a modified average of the four categories along with a few proprietary indicators. I consider valuation and trend to be the most important indicators and so these categories have a four-fourteenth weight. Interest rate trends were given a slightly smaller three-fourteenth weighting. Sentiment is more of an intermediate term indicator and does not fit here as well, so I only gave it a one-fourteenth weighting. The balance of the weighting went to our proprietary indicators, which weren’t given a larger share because I didn’t want this to be too much of a black box. The scaled score at the top left is intended to be a signal for investing in stocks long only without leverage. When used as this, it is somewhat conservative and can probably be expected to be 60% invested on average. The scaled score is essentially “zoomed in” on the combined score between -33 and 33. Because
