Market Update Archive

In general, over the last century, the market has tended to go up a lot more than it has gone down. So naturally, investors seeking returns want to be invested. At the highest level, there are two issues to contend with:

1. Occasional protracted periods of time where losses are more common than gains (bear markets), which can significantly diminish your portfolio earnings from several good years (bull markets).
2. Damping exposure to the volatility that still happens during bull markets for those who have lower appetites for risk, but still want some of the market rewards.

 
Traditionally, the S.T.A.Y. strategy has focused on addressing these two issues and has consistently achieved returns that have beat the market on returns as well as volatility. Until 2022, the STAY strategy was able to depend on intermediate and long-term bond funds to fill critical roles in addressing the two issues mentioned above. This year intermediate and long-term bond funds have seen unprecedented negative performances in an environment where they have traditionally performed well (bear markets).  
Initially, this was a challenging situation for AFS, but sometimes revisiting familiar issues with new constraints yields better solutions. It has been said that necessity is the mother of invention, and the need to replace bonds has produced some VERY interesting solutions.

1. Identifying new investments that we can count on to make positive returns during bear markets.
2. Finding low-volatility investments that can pair with our investments in the broader market (during bull or bear markets) but do not consistently follow the same trends of the market (low market correlation).

 
Addressing these two issues in a more efficient and dynamic manner will yield better results. We believe that we have found better solutions to these issues than anything we have previously had in place. While these are significant changes to the STAY strategy, we are still using the same algorithm to indicate when we need to be in the market or out of the market. The difference is that we have two new players on the team- inverse funds (that move in the opposite direction of the market), and a dynamic momentum-based investment selection that has low market correlation, low volatility, and consistent returns.
As the first step in implementing the S.T.A.Y. Plus™ strategy we implemented a portion of the broader market (Large Cap, Mid-Cap, Small-Cap and Technology) index inverse funds in portfolios proportionate to their risk tolerance level.  Since then, Aug 16th, our middle of the road portfolio, the BALANCE portfolio, as you can see below how the inverse funds responded to the approximate at one point -15% market downturn over the last couple of months with greater than a 5% increase in value.  The inverse of course is currently down during this most recent bear market rally, however if this is a typical bear market rally, the market will proceed downward and the inverse will once again be moving upward as you can see it has in the past few months.

​Portfolios with more exposure, (Growth, Mod Aggressive and Aggressive), to the inverse funds did even better as you can see with the S.T.A.Y. Plus™ Aggressive with about a 15% increase in value during the time the market as t about a -15% in value.  However, during bear market rallies the inverse is going to drawdown as the rally continues, however when the rally tops and the market proceeds down again, the inverse will once again make gains.
Update on the ALL-CASH current position.
ALL-CASH:  This signal was a temporary measure in a SELL signal environment that is part of the rule-base of the S.T.A.Y.™ strategy.  This signal is issued very infrequently but has to do with the monitoring of the investment positions that are being held during a SELL signal duration.  The objective of any positions held during a possible bear market must meet and maintain the following:  1.)  Maintain a volatility measurement of no more than a 10% drawdown.  2.)  Maintain a tendency to have a negative (inverse) correlation to equities. In layperson terms hold a position that has a tendency to trend upward when equities are trending downward.
Historically, bonds have met both of these two criteria for at least the last fifty years, see chart below from Vanguard.  However, we are observing a phenomenon in how bonds are correlating to equities since the beginning of 2022 that hasn’t been displayed in this manner for at least the last 50 years since 1973.  For the last two decades, returns from equities and bonds have been negatively correlated; when one goes up, the other goes down.  However, the current macroeconomic and policy backdrop raises some questions about whether this regime can continue.  The first 3 months of 2022 has highlighted this concern, with both equities and bonds selling off.  We don’t know yet if this is a sign of more to come or just a short-term anomaly of the two-decade pattern.  We will share some thoughts with you on this in the next few coming weeks ahead.

However, what we do know is that the most recent bond positions had violated the 2nd rule and, in some cases, both the 1st and second rules of the criteria necessary to continue to hold a bond and/or bond equivalent during a possible bear market.  Therefore, we are eliminating them and will remain in a CASH position until qualified substitutes are identified or until this unusual relationship between bonds and equities re-establishes it’s at least two-decade norm of maintaining a negative correlation between equities and bonds.  We will keep you posted.
P.S.  Those who are maintaining 401k’s in a “S.T.A.Y.™” simulation type of posture, just change your entire portfolio to a CASH/Money Market position until further notice.
 
Why Zero or Money Market looks surprisingly good in a Bear Market…...However, Stay Tuned!
 
This year to date, out of a database of 19,150 Mutual Funds and ETF’s, funds meeting the rule of not more than 10% drawdown and a positive return in a Bear Market as of 6/13/2022, only 15 so far this year have over 1% return, less than 10% drawdown and at least 5 years return history. (NONE have over a ten-year return history as required by S.T.A.Y. strategy Bear Market holding criteria)
 
None of them are bond funds; instead, they are all some type of Alternative actively managed mutual funds, like, Futures and various Alternative Strategy Funds and Real Estate that have very minimal history. Therefore, it would take considerable due-diligence efforts to learn what the strategies are that are creating these returns and what the possible risks would be to participate in them.
 
Furthermore, they are all Mutual Funds and not ETF’s which the STAY strategy is setup to trade easily.
 
Therefore, our current conclusion for the time being is to either be content with money market.  “ZERO IS YOUR HERO in a BEAR MARKET”, OR…. Add a feature to the S.T.A.Y.™ strategy to include inverse funds into the S.T.A.Y.™ strategy.
 
Inverse funds, which require an active management strategy, are something that I have had over twenty years of experience with and have developed strategies that operated very successfully during the bear markets of 2001-2002 and the bear market of 2007-2008.  Therefore, I am in the process of developing an extension of the S.T.A.Y.™ strategy that would open the possibilities of earning positive gains even in a Bear Market.  Stay tuned, we will keep you posted of this development.  We are actually very excited about it, and we think you will also be!
 
The good news is that we have been watching and have had our finger on the trigger to execute the SELL signal when needed which was on 2-23-2022. You can read the rest of the report to get some background as to how the S.T.A.Y.™ strategy has managed past market declines.  
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Remember you are compounding only when you are adding gains to previous gains, not when you are using current gains to make up for past losses

The biggest problem is the lack of momentum of the market for the last eight months illustrated best on the weekly chart comparing the bearish divergence between the price increasing (“altitude”) and the momentum (“velocity”) of the market decreasing.  This is a very visual example as to why the CAUTION signal was on.  This graphic helps to illustrate how just like an airplane that cannot continue to build altitude when the velocity is slowing or it will STALL, forcing it to make some adjustments in order to keep the aircraft safely suspended in air.  This is so similar to what the market is doing right now, it is in a STALL mode.  The solution as most certainly pilots know, is that there are only two choices, either a massive amount of acceleration has to take place to increase the velocity in order to continue the upward ascent, or its time for “nose down” and adjust the altitude.  The market is in the process of that decision making and if there are massive amounts of increased buying that creates a move upward in the market than we will be seeing a continued uptrend in the market, if not and we see the opposite, which is a massive amount of selling then it will be “nose down” for the market and a further increase of selling would pick up the momentum, but to the downside which would head it toward bear market territory.

THE GOOD NEWS, however is that the S.T.A.Y.™ strategy is designed for exactly times like this.  Every day the mathematical algorithm is calculated that will trigger when necessary the SELL signal, which will re-allocate ALL portfolios from Conservative to Aggressive removing the weight of gravity of the equity positions, as it will remove them from the portfolio and replace them with Money Market (Cash) and/or bonds which are way less volatile and historically have even had a correlation to the equity market that is inverse in nature often causing the bonds to increase in value as the equities are decreasing.  Look at the longer-term examples toward the end of this report to see the examples of that.

The remainder of this report is a carryover form past reports, helpful to those who are new clients and/or new to the S.T.A.Y.™ strategy methodology.
The “probability of a correction” that we have warned about since August, has materialized.  The market dropped over 3% from its all-time high based on reports of a new COVID-19 variant breakout in South Africa.  Regardless of the reasons that might motivate selling, from a technical standpoint the probability of something creating selling was quite apparent based on the information below that was contained in previous reports and updated after last week’s report.  We will continue in a CAUTION-HIGH-ALERT status, ready at moment’s notice to re-allocate portfolios if we have a SELL indicator develop.
Momentum weakening with continued Price increase. Caution signal still in place.

August 30th in the weekly report I issued an “Early Warning of Decreasing Momentum”.  Since then, the week of September 2nd the market proceeded to start into a correction mode creating a downside adjustment of about 6% until on October 4th, we issued the CAUTION signal, following which the market has rallied to the upside for the last four weeks putting us about 3% ahead of where we were when the “Early Warning of Decreasing Momentum” statement was issued on August 30th.  So, we have come full circle so far on this correction and are in essence back where we were about two months ago with about a 3% gain.  We had been keeping a very cautious eye on a key technical level of about 4485 +- that the market needed to break through to have a chance of breaking out of the short-term correction mode.  That has happened with the week before last week adding about a 2% gain and the market making new all-time gain up to 4718.  We now are facing an area of fairly high resistance from a technical indicator measurement, which would be the area of about 4650 +- which was surpassed last week by about 60 points.  Furthermore, it’s not surprising to a technical analyst that this resistance happens to be at a 161.8% Fibonacci retracement level.  This appears so far to be a textbook resistance followed by some retracement.  This would continue to be bullish as long as the market continues to recover its bullish advancement.  Although this is bullish, we are still viewing this with cautious optimism.  From a price-action standpoint we could release the CAUTION signal, because the momentum oscillator just last week barely crossed over the line from a negative value to a very slight positive value.  However, with the price being back to where it was before the early warning and climbing and the momentum on the weekly chart just now turning positive, I will give it a little bit more time to see if we are going to have just a “false breakout” or if the market can continue to the upside with both price and momentum and truly confirm a breakout to the upside.  Although the weekly momentum measurement has just moved from negative to positive, we still are facing a situation that for the last 6 months price has increased at a rate of about 11% while the momentum value has decreased about 30%, so there is still a bearish divergence between these two measurements.  We are still not back to an environment where price and momentum are both moving upward lock-step on a longer-term basis.  So, although the development of the last three or four weeks have been encouraging to the bulls, only time will tell if the bears will still come “knocking” or not.  So, if we do drop the “Caution” signal in the next few weeks, it could still be pre-mature to assume that all is totally smooth sailing.  Only time will tell.

Although the market has been making new all-time highs consistently the momentum of the market at the same time had been gaining to some degree, until about May of 2021.  The last two week’s market action created a drop in two of the three weekly indicators that had previously been remaining positive.  This happened during only about 5% drops in market value but when the momentum had been dropping for over 5 months while the market price was still increasing.  So far this had been only about a -5% drop from the last all time high of just 3 weeks ago.  This correction is still only a minor (1% - 5%) correction, whereas an intermediate correction (6% - 10%) is very likely to develop before this correction is over with.  However, it was a significant enough correction to cause two of the three weekly indicators to go negative which is the criteria for triggering the CAUTION signal.  In order for a full SELL signal to happen two of the three MONTHLY indicators would need to go negative.  So, the market will need to find a short-term bottom here hopefully within the range of only an intermediate correction (6% - 10%) and start a bounce upward to avert an actual SELL signal.
The CAUTION signal is a cautionary signal to stay consistent with investing (especially large Lump Sums of money) with the trend as opposed to against the trend.   However, for those of you that are adding periodic (weekly or monthly) smaller investments into your account, this doesn’t mean to stop doing that.  Also, for clients that are just now opening accounts, it is OK to open them as we need to get your funds re-allocated to a safe position rather than leaving them subject to a potential market drop in your existing portfolios.  While the wait signal is in place, we will hold your funds in a CASH position until the BUY signal is fully in place without the CAUTION signal existing.  For those who are considering adding a significant lump sum of money into your existing account, we will do the same thing by retaining the new monies in CASH until the BUY signal is still in effect without the CAUTION signal.  The majority of these CAUTION signals end up being either Minor or Intermediate corrections, so for smaller periodic investing it actually helps you take advantage of the “Dollar Cost Averaging” strategy of investing systematically on regular intervals, especially the shorter intervals of weekly and monthly.
The goal of the S.T.A.Y.™ strategy would be for the SELL signal to only trigger as we near a Major (10% - 20%) or Primary (20% and greater i.e., Bear Market) correction.  Although all SELL signals have been preceded by CAUTION signals, less than 5% of the CAUTION signals have been followed by a SELL signal.  Only time will tell.

So, if you are investing smaller periodic investments on a weekly or monthly basis you can continue doing so and even new accounts and large lump sums are safe to do so because we will retain them in CASH until the CAUTION signal is removed.  If you have any questions on this, please let us know.
 The chart below shows how momentum was gradually decreasing since about May of this year when at the same time price was continuing to increase.  I mentioned the observance of this numerous times over the last few months until the end of August when I switched the terminology to that of an early warning sign of decreasing momentum that I warned about almost a month ago on the weekly 8-30-2021 report when the market was continuing to make almost daily new all-time highs.  That observation and warning has materialized.

As you can see in the daily charts below the downside movement over the previous two weeks of about 5% was retraced the week before last week to about the 61% Fibonacci level of about 4454.  If this rally cannot material exceed 4485 or so, then I would expect that we will see another 5% corrective move to the downside.  Daily and Weekly momentum indicators are dropping quite rapidly, thus the new CAUTION signal this week.  However, the market is well overdue for some degree of correction.  So far this would be classified as a minor adjustment (1 – 5%).  Although we did see about a 2% upward bounce last week, If the remainder of this week follows through with more drawdown, we could see more of an intermediate adjustment (5 – 10%).  Corrections in an on-going bull market are needed and somewhat healthy.  However, if the correction starts moving into the 10% + area then it starts to become threatening as a possible early stage of a bear market.  We will continue to monitor this development and take action when and if it is necessary.

The last three weeks didn’t help the weekly momentum indicator as it has turned negative after last week’s action.  The momentum on the weekly charts is beginning to develop a bearish divergence between price and momentum which is beginning to get to be of some concern if this trend continues. The market is still trending upward with periodic minor adjustments.    April ended with about a 4.7% gain for the month in the S&P500, May ended the month with only about ½% gain from April, so conserved all of April’s gains.  June showed a higher high than May, not a lower low with an end-of-month gain of about 2%. Although May was somewhat of a pause, we still have a market uptrend in place, higher highs and higher lows.  June ended the month, showing about a 2.2% gain for the month creating a mid-year the S&P500 is up 17% Year-to-date.  July added to this with about a 2% gain and August about a 2 ½ gain, followed by September with about a -5% drop therefore wiping out July and August’s gain from the mid-year 17% total, now making it more like a 12% YTD total.
The market has clearly continued to hold the November 2020 breakout and maintained a pattern of an up-trending market.  Although there can always be some unexpected event that could jolt the market even worse, it appeared that the market was regaining some healthy price AND momentum gain.  However due to the slowing of momentum in the weekly charts, we will keep you posted if it appears that we will be needing to take action in re-allocating portfolios as needed if a SELL signal materializes.  Until then we will continue to hope for an increase in momentum congruent with the price momentum.

Early Warning Signs of Decreasing Momentum:  Below in the weekly chart comparing price of the S&P500 you can see starting about May of this year the bearish divergence beginning to develop of increasing price movement but decreasing momentum.  Solution to this is either a significant increase in momentum or an adjustment downward in price.  This weakness is not yet showing up significantly on the monthly charts.

See the monthly graph below that shows the MACD (Moving Average Convergence Divergence) compared to the market price of the S&P500.  From 2009 to 2018 we clearly had an up-trending market AND up trending momentum.  However, in 2018 you can see a very clear shift in momentum and price volatility.  Although the market has continued to attempt to move forward in “spits and spurts” and price has moved upward 2018 - 2020, momentum has continued to slow. 

​This is not sustainable.  The only bullish solution would be a substantial increase in momentum, otherwise the bearish solution of a massive decrease in price will take place which it did in March of 2020.  We need for momentum (MACD) to make a new high as well as price making new highs, this would continue to be very bullish.  However, for the last two years (2018 – 2020), every time the market struggles to make a new high, instead of there being a corresponding new high in momentum, it is instead only a “lower high”.  This is a bearish recipe for “stalls” that result in very quick corrections to the downside as we have seen the last year in March/April 2020.  Following that massive (35%) adjustment in price, the last few months, we saw a penetration to the upside with momentum.  However as seen in the weekly chart above that surge in momentum may be starting to see some leveling off, this is possibly an early warning of some market adjustments in the near future, possibly the next 30 to 60 days

Some have asked and others probably wondering, why we haven’t been in the market after the March 2020 lows to take advantage of the post March low rally?  The reason has to do with the differences between a TRADING strategy and a TREND FOLLOWING strategy.  These are two totally different and, in most ways, OPPOSITE strategies.

Trading strategies are designed to take advantage of and benefit from volatility in price changes.  Trading strategies are usually designed for short term time frames all the way from a few seconds/minutes during an intra-day trading strategy to one of daily/weekly price movements.  Trading strategies are very dependent on timing the entrance and exit opportunities well in order to be profitable.  Furthermore, they are very trading intensive and can result in being in and out of the market multiple times in their given time frames, intra-day, daily, weekly, etc.

In contrast, a Trend following strategy, such as the S.T.A.Y.™ strategy, is a much longer time frame strategy that is designed to exit the market upon anticipation of volatility and furthermore, stay out of the market, until volatility indicators have subsided and momentum of the market has stabilized indicating that a more “normal” uptrend is in place.  In other words, One down Day followed by One Up day, does not establish a trend.  In the same way neither does three negative weeks followed by three positive weeks establish a trend.  And in our current situation three monthly declines followed by three up months does not establish a trend.  So far, all that these have indicated technically is that we are still in a volatile market and that for a trend-following strategy, it is still unsafe to be invested in equities.
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Now that doesn’t mean that we are not invested at all.  The S.T.A.Y.™ has also been developed knowing that bonds (green line) normally have a somewhat upward bias during equity market (red line) downturns, the graph below helps to point that out.  The red line being the S.T.A.Y.™ strategy blend of equities (Large Cap, Mid Cap, Small Cap and Technology) and the green line S.T.A.Y.™ strategy blend of bond indexes, helps to illustrate how bonds have performed quite well, actually outperforming equities most of the year without near the volatility.  Even sense the SELL signal, shown in the bottom graph showing starting March 4th when the S.T.A.Y.™ strategy exited the equities market, the bonds have performed quite nicely in relationship to equities since March 4th and with extremely less volatility.  Equities caught up with bonds and just started to surpass their performance when the S.T.A.Y.™ strategy triggered a BUY signal Nov 9th, 2020 shown with the small red arrow at the bottom of the graph at which time the S.T.A.Y.™ strategy re-allocated back into equities.  Furthermore, the S.T.A.Y.™ strategy will remain in equities as long as the trend-following technical measurements continue to support and confirm the Nov 9th BUY signal.

The S.T.A.Y.™ SELL signal was executed on March 4th at about 7% below the All-Time high made in February.  At that time, we eliminated 100% of all equities from ALL S.T.A.Y.™ portfolios and re-allocated to all Bonds and Cash.
Bonds which normally have a high level of stability and even a tendency to have an upward buoyancy when stocks are declining.  However, during this mass hysteria even Bonds are suffering 10 – 12% losses, grant it mild compared to the 30% to 40% losses of stocks so far in just one month since the all-time high was established February 19th, 2020.
Furthermore, the S.T.A.Y.™ strategy investment rules have a rarely engaged “stop-loss” provision for even Core position funds (those held during a bear market), such that when that stop loss is triggered, they will be eliminated and replaced with Cash.  That clause was exercised.  If the market achieves a sense of stability moving forward, these bond positions will be re-implemented, but in the mean-time ALL portfolios whether Conservative or Aggressive were maintained in 100% money market positions.  These liquidations happened the 24th during trading hours before the close of the market.
However, after bonds began behaving more normally, the S.T.A.Y.™ portfolios during a SELL signal, re-employment of bonds appropriate for the given risk of each portfolio, i.e., conservative 40% bonds to moderate aggressive 80% bonds and aggressive 100% bonds.  However, the remaining portion of all portfolios are in cash and 0% equities.
At the low of this recent decline, the market was back to where it was THREE years ago.  That’s why it is so important to have an actively managed discipline in place to keep from THREE years of gains being wiped out in just slightly less than one month. 
By exiting equites on March 4th, just a little over 7% below the February all-time high, we were able to conserve most of the gains from the last three years as compared to the “buy and hold” community spending we don’t know yet how many years trying to recoup their recent losses.  Remember you are only compounding when you are able to add gains to previous gains.  You are not compounding when you are spending time using future gains to make up for past losses.
 
(The remaining text is a repeat from previous weeks, but is still pertinent and helps to give a background for new clients coming on.)
Finally, after almost 6 months following the SELL signal on 10/25/2018, the Bullish posture won out.  The S&P500 had finally caught up and started to move ahead of the bonds towards the end, however it has taken the “hare” nearly six months to catch up with the “tortoise”.  So now a re-allocation back into equities has been done on all portfolios.  So, depending on the risk tolerance of the portfolio a re-allocation has taken place that will allow anywhere from 20% (Conservative) to 100% (Aggressive) exposure of the portfolio to a blend of equities representing the Small Cap Index, Mid-Cap Index and the S&P500 Large cap Index.  Bond and Cash exposures have been reduced and reallocated as dictated by the risk tolerance of the portfolio in a bull market posture.
Like the story of the “tortoise and the hare” since the SELL signal of October 25, 2018.  In the last 6 months the bonds (tortoise) have plodded forward with over a 6% gain since Oct 25th, (Note: 1% per month is not bad), while the S&P500 (hare) has been on a “buy and hold” rabbit trail.  As you can see by the graph below that bonds have a degree of inverse correlation to the equity market.   You can visually see the buoyancy that bonds have when equities are down-trending.  Also, you can see in this graph that the S&P500 has now made a higher high than the previous highs in this graph, therefore it is making progress towards breaking out of its long-term downtrend.  However, there can still be corrections along the way, at this point it would take a significant correction to reverse the signal.  In the time that it was taking the S&P500 to go through its major correction, nearly 20%, the tortoise was gaining about 1% per month, not bad for a tortoise!  The good news about the S.T.A.Y.™ strategy is that when the “hare” does get back on track in a good bull market, he gives the tortoise a ride until the next potential bear market.  It’s a new and improved tortoise and the hare story. 😊
Bonds (Green) vs S&P500(Red) since the 10/25/2018 S.T.A.Y.™ SELL signal.

As explained below the S.T.A.Y.™ strategy, which is an algorithm of price and momentum indicators, has been designed to trigger as the market approaches the possibility of a major (10% to 20%) correction.  The current SELL signal was triggered with the market action of October 24th with all equities in the S.T.A.Y.™ portfolios sold out of the market on the 25th with a market close of 2705.  So, this exit was at a level 8% below the market high of the September 21st high of 2940.  Therefore, typical growth portfolios with a 60% exposure to equities would have experienced only about a 5% correction. 
When the SELL signal is in play, we don’t know for sure that a bear market is ahead or not, all we know is that the market is on very “thin ice” and we are experiencing a significant major 18% - 20% correction in a bull market that has very real possibilities of developing into a full-fledged bear market (in excess of 20%) and a much deeper correction than the 18% - 20% experienced in December of 2018.
Wednesday, October 24th’s market action triggered the 6th SELL signal in a 24-year historical period for the S.T.A.Y.™ strategy.  Therefore, all S.T.A.Y. ™ portfolios eliminated equity positions and increased Bond and Cash positions to maintain a conservative posture until a BUY signal re-appeared, April 15, 2019.  The conservative position for this period of time consisted of up to 40% to 100% bonds that have a proven track record during bear market cycles and 0% to 60% in cash.  Therefore, portfolios during a SELL signal do not have any exposure to equities, unlike the industry mantra of buy and hold.  By following the industries recommendation of buy and hold is how 401K’s became 201K’s during two of the last “deep correction” bear markets.  Advanced Financial Solutions agrees that there are times that Buy and Hold makes sense (i.e., a Bull Market), however there are other times (i.e., a Bear Market) where it is total Non-Sense!  When it comes to bear markets, “buy and hold” is not a strategy, it’s a lack of a strategy.  Therefore, Advanced Financial Solutions takes measures to protect your capital during periods of market uncertainty and major or primary market corrections.  So, if you know someone who doesn’t like the taste of their “Buy and Hold Kool-Aid”, 😊 have them give me a call.
Below you will see a graph of the S.T.A.Y.™ historical simulation representing 24 years of market history.  The S.T.A.Y.™ strategy has had 5 times in that 24-year period of time that it re-allocated from equities and bonds to all bonds and cash for a period of time. The industry says that “you cannot time the market”.  I don’t agree.  More accurately, they don’t want you to try and time the market.  You can see that market “stand asides” # 2 and #3 both saved an investor 30% to 50% of their capital.  By doing so an investor is able to re-invest the majority of their capital when a BUY signal is issued.  True there were 3 out of the 5 times that were “shallow” corrections and statistics show you would have missed small amounts of return by standing aside from the market.  In my opinion a small price to pay in the long run.

The goal of the S.T.A.Y.™ strategy would be for the SELL signal to only trigger as we near a Major (10% - 20%) or Primary (20% and greater i.e., Bear Market) correction. 

Following a SELL signal the market has either experienced a “shallow” correction or a “deep” correction (i.e., 2001 – 2002 and 2007-2008 when corrections were in the 50% range).  A shallow correction would be a possible Major correction in the range of 10% to 20% correction.  A deep correction would be a Primary correction in excess of 20%. 
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I would encourage you to take these SELL signals seriously because there is no definite way to anticipate which type of correction it may be, the safest approach is to stand aside of the market during these periods of time and then re-enter when the indicators show a confirmation that the correction is over.  I will keep you posted, in the meanwhile my hope is that this type of management is giving you more peace of mind compared to being at the mercy of the market.