Courtesy of Doug Short.
On May the 18th I pointed out that sometimes it can pay for investors to put their money in a “Shoe Box” and not have their investment assets at risk. Below is the original chart, reflecting that key “credit based” indicators were very close to sending the first “Shoe Box Sell Signal” since the 2007-2008 time frame (see original post here).
As I pointed out in the original commentary, the two indicators posted on the top half of the chart are designed and driven by different types of sensitive credit issues in the economy. I’ve found that since the late 1990’s both have been leading indicators of equity reversals, both to the upside and downside.
The original post was created because the “Shoe Box” indicator was so close to sending a rare signal! At the time of the original post the S&P 500 stood at 1,340. Wall Street does a great job of suggesting that investors keep their monies at risk all of the time. When was the last time you heard one of the major investment firms suggested to put part or all of your hard earned capital in a “Shoe Box” for a while?
Investors who avoided the 90% decline from 1929 to 1932 increased their purchase power by a whopping 900% (see table here). 100% purchasing power increases took place if investors avoided the 2000 to 2003 and 2007 to 2009 declines. At this time the Shoe Box indicator continues to suggest that protection of capital is key. And since the signal was triggered, sizable purchasing power increases have taken place. Somewhere down the line these two indicators will give a buy signal again!
(c) Kimble Charting Solutions
blog.kimblechartingsolutions.com
