Before you get excited about any “bullish” or “bearish” signal, you need a baseline. Since 1950 the S&P 500 has been higher:

• 1 week later: 56.7% of the time (+0.2%)

• 1 month later: 61.6% of the time (+0.7%)

• 3 months later: 66.1% of the time (+2.1%)

• 6 months later: 68.9% of the time (+4.3%)

• 1 year later: 72.8% of the time (+8.8%)

This is our baseline.

Most studies look convincing at first glance.

Very few hold up under basic scrutiny.

When you see research showing forward returns that look meaningfully better or worse than the baseline, slow down and ask a few simple questions:

First, is this actually better than the baseline? If it isn’t, there is no edge. It’s just noise dressed up as insight.

Second, how many observations are behind it? Frequency matters. A signal built on a small sample is fragile. The more occurrences, the more confidence you can place in it.

Third, does the edge survive without the outliers? Extreme events can distort everything. Remove them, recalculate, and see what remains. If the edge disappears, it was never dependable.

Fourth, does the current environment match the study? Oil shocks, recessions, bubbles, policy shifts. These things change the game. If the backdrop is different, treat the research with caution and wait for price to confirm before acting.

Finally, check your own intent. Are you using research to make decisions or to feel better? It’s easy to cherry pick studies that support your view and ignore the ones that don’t.

Use research the right way. Not to predict, and not to justify. Use it to map scenarios.

If this happens, then I will do that.

And then let price confirm before you act.

C.E. Kirk

Kirk's Opportunities

kirksopportunities.com