What will it take for me to emerge from my cave, ready to make double-barreled buys back into the long side of this market?
For one, I’d need to see some stabilization and relief of the financial stress in the markets, in a sustained way. All the news about government guarantees, backstops and capital injections dont’ mean squat if these actions don’t take hold. Show me. I’m from Missouri (not really, just figuratively speaking).
Another milestone that must happen would be for the fundamental underpinnings in the economy to stabilize. And probably not just the U.S., but other developed nations, like Japan, Germany, France and the UK. Also leading economic indicators (LEIs) to begin to turn up.
These all have been absent in the last two rallies of early April and mid-July.
I simply would watch:
1. The ISM mfg index
2. The Conference Boards Leading Index rate of change, y-o-y, and
3. The NFIB Small Business Optimism index
When I see these improving, that is one sign. There are others like the NYSE Bullish Percent index and even more simple ones like the 50- and 200 – DMAs.
Look at a number of signs, don’t just focus on one or two. The more, the merrier.
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