I received a call from Bruce, one of my investment clients last Tuesday morning, June 8th. He informed me that he had suffered enough pain and that he was ready to bail out of the market and to sell everything. The S&P 500 Index was at 1042 at that moment. I informed him that his account was only 50-50 stocks versus bonds to begin with and that we had sold some positions in mid April and raised some cash so that he was only about 30% in equities. He said that the market is about to crash.
Bruce also called me on two other occasions; October 4, 2002, when the S&P 500 was at 800. The market bottom at the end of the 2002 downturn was on October 9th at 776 so he only missed the bottom by 3%. He also called me on March 5, 2009, when the S&P 500 was at 682 and the bottom ended up being on March 9th at 676, so on this occasion he only missed the market bottom by 1%. On each call Bruce was ready to bail out but I talked him into staying in.
If the Bruce barometer is correct, our June 8th S&P 500 index of 1042 should be within 2% or 3% of the market bottom for this cycle. I think that we will take this as a reliable technical indicator and begin to reinvest cash into our client accounts. It has been very reliable so far so it must be as good of an indicator as any other expert’s opinion.
Let’s hope that the Bruce barometer is correct and that we are near a temporary bottom.
For additional information contact Richard Taylor.