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
Images: Flickr (licence attribution)
About The Author
My original dshort.com website was launched in February 2005 using a domain name based on my real name, Doug Short. I’m a formerly retired first wave boomer with a Ph.D. in English from Duke. Now my website has been acquired byAdvisor Perspectives, where I have been appointed the Vice President of Research.
My first career was a faculty position at North Carolina State University, where I achieved the rank of Full Professor in 1983. During the early ’80s I got hooked on academic uses of microcomputers for research and instruction. In 1983, I co-directed the Sixth International Conference on Computers and the Humanities. An IBM executive who attended the conference made me a job offer I couldn’t refuse.
Thus began my new career as a Higher Education Consultant for IBM — an ambassador for Information Technology to major universities around the country. After 12 years with Big Blue, I grew tired of the constant travel and left for a series of IT management positions in the Research Triangle area of North Carolina. I concluded my IT career managing the group responsible for email and research databases at GlaxoSmithKline until my retirement in 2006.
Contrary to what many visitors assume based on my last name, I’m not a bearish short seller. It’s true that some of my content has been a bit pessimistic in recent years. But I believe this is a result of economic realities and not a personal bias. For the record, my efforts to educate others about bear markets date from November 2007, as this Motley Fool