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Posted on March 2, 2016 -
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By John Reizner |


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Do you think stock investors would like to use just a single chart and just one indicator; namely, the Vortex indicator - to potentially identify when secular (long-term) bull and bear markets are starting and ending?
 
If investors could have caught every major bull trend in the stock market (measured in years) over the last twenty years while avoiding the bulk of devastating bear market declines, it would have simplified the lives of tens of thousands of stock market aficionados. 
 
If so, then this indicator may be investors ticket to achieving stock market success.
 

The Vortex Indicator
 
The Vortex study has two oscillator plots: V+ and V-. When V+ crosses above V-, the underlying is making higher highs – it is a trend trigger and the start of a new uptrend. Similarly, when V- crosses above V+, the start of a downtrend is signified.
 
Using the study on a twenty-year S&P 500 monthly chart allows investors to filter out the noise occurring in cyclical (short-term) bull and bear markets which may last for a couple of years and to potentially achieve larger profits by participating in secular (long-term) bull trends.
 
Plot this indicator on a monthly chart on a long-term monthly chart and the results are self-evident. There was only two whipsaws over twenty years of price action that are not noted below for brevity:
 

  1. An S&P 500 sell signal was given on December 31, 2000 at 1,320.28. Investors were spared from most of the dot-com crash as the stock market later fell to a low of 768.63 in November 2002.
  2. A buy signal was triggered in August 2003 at 1,008.01 in the S&P 500.
  3. A sell signal was given in January 2008 at 1,378.55 and the stock market then cascaded downward to a low of 666.79 in March 2009.
  4. A re-entry signal was triggered in November 2009 at 1,095.63.
  5. A recent long-term sell signal was given at $1,920.03 in December 2015 (about six years after the 2009 "buy" signal). We are currently in bear market mode.

 
Learn more about your investing psychology and stock investing in both bull and bear markets as I relate in my short book avaialble here.

 
If investors feel the need to trade more or to catch more of more than the secular trends cited above – then the Vortex indicator in this configuration may not be for them.
 
However, if investors would rather be their own financial advisors or if they want to sit back and relax and have more time to enjoy life while investing – then this way may be the way to go.
 
Related articles:
 
Best Investing Books | Stock Investing 101
 
Would You Rather be an Investor or a Trader?
 

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