Introducing the JK Misery Index - Part II
Key points:
- Part I detailed how the JK Misery Index (JMI) is calculated and some general performance stats regarding S&P 500 performance
- In Part II, we will take a more systematic approach and review stock market performance during favorable and unfavorable periods as designated by the JK Misery Index
- While we will be analyzing JMI as if it were a standalone trading system, note that we do not, in practice, treat it as such, and continue to prefer a weight of the evidence approach to market analysis
A quick review
For full details on the construction of the JK Misery Index (JMI), please review Part I. In a nutshell, however, the model:
- Combines mortgage rates, inflation, and unemployment
- Compares the raw calculated value to a moving average (14-month exponential)
- Observes the gap between the raw value and the moving average and reports that as the indicator value
- Readings below 35 are considered "favorable" for stocks
- Readings above 35 are considered "unfavorable" for stocks
Taking a systematic approach</