Signals

If you were wondering last week if the stock market was in trouble, you were too late. And that is no April Fool’s joke.

EDITORIAL NOTE: I wrote this Sunday Mar 29, and I’m out of the country. So I have no idea what’s happening today!

Anyway.

Persistent war, higher oil prices, pernicious inflation, matter. But the stock market doesn’t just wake up one day and go, “Shazam! Something is wrong!” It much more systematic than that.

And I do find it amusing how all the people in the MONEY MANAGEMENT business are telling investors to stay invested. What are they going to do? Tell you to sell stocks?

The trouble showed up in October last year (meaning the war in Iran didn’t cause it). Remember the Cryptocurrency Crash on Oct 10, 2025? That was one of the great volatility events in recent market history back to 2017. I said so with Brian Sullivan on CNBC. Another great volatility event occurred Dec 18, 2024. Look what happened after that.

It’s like a knock in your car’s engine. You can use humorist Dave Barry’s strategy and turn up the radio. But a knock in the engine is telling you something!

The same thing happens in the stock market. It’s not that hard to see if you know what to look for (apologies for ending the sentence with a preposition). Volatility.

Even better: A break in DEMAND. Big signals. Don’t ignore them.

Everything comes back to Demand and Supply. For us, Demand is an algorithm normalized to a 10-point scale metering buying and selling. When BUYING slows, beware. It’s true in any market. Supply is Reg SHO short volume (with our proprietary treatment). All volume is long or short. Watch the balance of the two.

In 2006 in California, I had a house on a golf course in a gated community. Every time I think about it, I say a prayer of thanks to God. I got a real estate agent, prepped it for sale and never put it on the market. It sold to the client of the first agent that previewed it.

Later that month, my neighbor across the street put his house on the market. It never sold. The market turned THAT fast. Demand dried up. But we didn’t KNOW it for a long time. Right? It wasn’t until 2007 that we realized real estate was breaking. But by then it was too late.

All markets behave this way. Often, we don’t appreciate the signals.

The stock market stalled in October 2025. Not in March 2026. We have experienced a CONSEQUENCE of what happened then. It’s the equivalent of my neighbor in California twenty years ago putting his house on the market and nothing happened.

It doesn’t seem like a big deal at the time. But we have to beware of the signals. It’s like that theological adage about having an ear to hear and an eye to see. And I’m speaking to myself, not to you! We have to pay attention.

You will hear market professionals on TV say “if you miss out on the ten biggest days…” blah blah. That is BS. Ignoring signals and losing money isn’t a good idea. The prudent foresee evil and hide themselves. And the prudent see opportunity too. We’ll look for those signals in time.

Demand in the stock market broke below 4.0 Mar 16, for the first time since April 2025. A fall below 4.0 after a long stretch without one (this was the longest we’ve recorded, exceeding even the epic central-bank-cash Pandemic boom in 2020-2021) is the end of a cycle.

Now we’ll have to complete a down cycle. When the cycle ends with a sharp break below 4.0, THAT will be an entry point. I don’t know how long that’ll take, but we’ll know in the data. Am I calling a bear market? Of course not. I don’t know. We just read the data.

We run model portfolios for subscribers at our decision-support platform, Market Structure EDGE. Last year, we just CRUSHED it. Our models COOKED. Until about October. The Focus Momentum model (with just five stocks at any given time) actually peaked Sep 23, 2025, up 49.7% (it finished 2025 up 37%). The Focus Low Volatility model (also five stocks selected quantitatively daily) had the longer contrail and topped Nov 25, 2025, up 69.8% (ending the year up 60%).