Passive Income for Life

Stoken Investment Strategy - Summary by CollinSeow

I’ve been tracking Collin Seow’s financial technician blog for sometime and he posted something very interesting today which I cannot resist quoting a segment.

Does that mean it is time to buy into the stock market again?

For the full summary in his blog, click here.

……

According to Stoken, investors following the inflation indicators would have participated and profited in every hyper-inflationary period, plus they would have been fully invested during the bulk of the post World War II bull markets.

Finally, the psychology of investors impacts the stock markets, creating periods of pessimism when stock prices are cheap in relation to value and periods of optimism when stock prices become expensive in relation to value. Stoken’s research shows that no sustained bull market has begun until the Dow had fallen into a two-year low. Accordingly, the best time to purchase stocks is one week after the market hits its two-year low point.

This ‘buy zone’ continues until nine months have passed since the Dow made a two-year high. The stock market is then in a ‘caution zone’ which lasts until the Dow once again drops to a two-year low, restarting the cycle. When the Dow hits a five-year low, extreme pessimism has taken over the market, creating a stock buying opportunity five months after experiencing that low point.

Stoken contends that using the above indicators, an investor can design a flexible investment timing strategy that deftly moves him or her out of stocks or real assets in tune with the investment climate and inflationary and deflationary signals.

Do you agree?

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