How was the model developed?
Charts and hard data were meticulously studied to answer the following questions:
- What do the early stages of a new bear market look like?
- What do the early stages of a new bull market look like?
- What does a healthy market look like?
- What does a low-probability (unhealthy) market look like?
- What data points and charts are helpful?
- What data points and charts are not helpful?
- What characteristics do winning investments share?
- What characteristics do unfavorable investments share?
Given there are an overwhelming number of charts, indicators, and economic data points to consider when making investment decisions, one of the most powerful elements of model development centers around what data to use and what data to exclude. The key is to find data that is consistently helpful over long periods of time, and to exclude data that leads to false signals.