When Is It Time to Invest?
Long-time readers of ITA Wealth Management are familiar with the Quantext Portfolio Planner (QPP) analysis and to a lesser degree the "Delta Index" worksheet I developed as an extension to QPP. The jury is still out as to the predictive powers of the Delta Index. Is it useful to any degree? In the first screen shot below, I am showing what the VTI did over its lifetime and since it is a total U.S. market ETF, it serves as an excellent guideline for this analysis.
Keep the above graph in mind as the following analysis will show what the "Delta Index" was telling us back in April of 2006. According to the above graph the market had another year and a half to run.
The following data is from 4/15/2003 through 4/15/2006. I chose the starting date as the first day EEM was launched. In these examples I will be using iShares as most of the Vanguard ETFs were non-existent. The projections are grim. The following data is telling investors to get out of the market. If one goes by the "Delta Index" column, we would continue to hold VTI and IVW, large-cap stocks.
I conclude "Delta Index" gives an early signal. Much too early in fact. However, if one looks at the top graph, the market had a great run. One had no idea how long it would run.