It’s good idea to assess various stock market indicators from time to time to determine whether there might be strong “buy” or “sell” indicators overall. In the below paragraph I present the overall stock market indicators I tend to track and their associated ratings (STRONG BUY, BUY, NEUTRAL, SELL, STRONG SELL). Based on the rough average of these indicators I presently rate the overall stock market as: SELL. Based on this rating I would generally do nothing – however, because I had pretty solid gains on several of my stocks I decided to do some selling today just to reduce my risk.
As a low-risk investor, and the tendencies of overall stock markets to go higher over time, I usually wait for a STRONG SELL rating before selling shares to reduce my overall stock market risk these days (sellers are wrong 93% of the time over rolling 5-year periods – I talk more about this later in this post). If you are a low-risk investor, you might consider doing the same unless you have solid gains and want to reduce your risk a bit like I did today. Higher risk investors will likely be better served by staying the course and riding out the ups and downs of the overall stock market. If you aren’t sure what your investment risk category is, you can find it here: https://brighterdayslifecoaching.com/investment-tools/
Below are my current ratings across the overall stock market indicators I regularly track and evaluate:
a. STRONG SELL (39.95 with recent peak of 40.03 in Jan 2026 – 2nd highest level ever behind 44.19 in Dec 1999 just before Dot Com Bubble): Cyclically Adjusted Price-to-Earnings (CAPE) ratio.
b. STRONG SELL (221% – 2nd highest level on record only behind the previous quarter’s reading of 230.3%): Buffet Indicator.
c. SELL (1300 days from 12 October 2022 low until 3 April 2026): Average Length of Bull Market is about 1011 days.
d. NEUTRAL (99% from 12 October 2022 closing low of 3577.03 until 15 April 2026 closing high of $7,022.95): Average % Gain of Bull Market is about 114%.
e. WEAK SELL: Volatility index (VIX) approaching lows (SELL) or highs (BUY) on a historical basis.
f. SELL: Technical Indicators for S&P 500 approaching lows (BUY) or highs (SELL) – especially when looking at weekly charts over several years.
g. WEAK SELL: Technical Indicators for VIX approaching lows (SELL) or highs (BUY) on a historical basis.
h. STRONG SELL (S&P 500 is at all-time closing high and has about a 35% gain over 1 year): Gains substantially above long-term stock market average. The S&P 500 index gains about 10% annually (on average including dividends) – so if you experience substantial gains above and beyond that then it might make sense to sell at least part of the gains.
i. SELL (4.74% which is slightly higher than present TNX of 4.31%).
j. SELL (4TH Quarter GDP at 0.7% which is probably lower than what would be expected and likely to reverse in coming quarters but there are substantial headwinds with the rise in oil prices and inflation and reduced likelihood of Fed interest rate decreases (and potential rate increases): GDP approaching certain thresholds: the overall stock market generally experiences substantial gains when GDP is either negative or at 2.1%+, while substantial losses tend to be experienced when GDP is between 0% and 1% (losses are also generally experienced when GDP is between 1.1% and 2% – but the losses are much smaller). Keep in mind when considering this that the stock market tends to be “forward-looking” in nature and typically reflects what investors believe will happen in the next 6+ months.
k. NEUTRAL OR STRONG SELL DEPENDING ON WHERE YOU COUNT FROM (Presently 6 years if including COVID-19 which was only a 2-month recession from February-April 2020 – Presently 16.75 Years from June 2009 if COVID-19 is not included): Average number of years between recessions is about 6.5 years and the average stock market decline during recessions is about 30%.
l. SELL (presently about $82 but rated SELL since item j is SELL): Brent oil prices. Physical prices are actually much higher than the quoted oil futures prices. Some economists estimate that sustained Brent oil prices over several months of about: 1) $125 or higher would cause a recession in Europe – Asia seems even more affected by these Oil prices so their threshold is probably lower, and 2) $150 or higher would cause a recession in the United States. These thresholds might have to be adjusted over time but for now the above seems to be reasonable thresholds to track and be mindful of. Keep in mind that per item j. above (GDP), that even an economic slowdown can adversely affect the overall stock market – not just recessions. So, even oil prices sustained below the above levels can be detrimental and warrant caution.
You can read more about these indicators via the following posts: https://brighterdayslifecoaching.com/a-structured-market-based-buying-strategy-for-investing-well-with-minimal-effort/ (Overall Stock Market Based Buy Strategy – scroll down to item 4) and https://brighterdayslifecoaching.com/a-structured-market-based-selling-strategy-for-investing-well-with-minimal-effort/ (Overall Stock Market Based Sell Strategy – scroll down to item 2).
Now, although each of the above indicators has limitations, they can signal whether the overall stock market might be approaching extreme highs indicating a coming potential, substantial decline – especially when these highs are signaled by several indicators. Many indicators, however, are not very precise, and tend to reflect high/extreme sell readings frequently. So, these indicators tend to run hot.
The overall stock market tends to go up over the longer-term because demand outpaces supply for much of the time, causing share price increases (you can read more about this here: https://brighterdayslifecoaching.com/why-the-overall-stock-market-goes-up-over-the-longer-term/). Due to this tendency, the overall stock market naturally becomes more expensive over time – so it can be difficult to determine the point at which it becomes so expensive that substantial declines occur.
The above are just a few of the technical and overall market indicators you can use. There are several others available including those discussed here: https://finance.yahoo.com/news/why-more-wall-street-firms-230100571.html
Keep in mind you don’t have to be very precise when buying into the overall stock market – a gain is experienced 93% of the time over rolling 5-year periods and 100% of the time over rolling 10-year periods no matter when you buy. In sharp contrast, being a seller or waiting for drops to happen can be challenging in that you will be “wrong” 93% of the time over rolling 5-year periods and 100% of the time over rolling 10-year periods. So, you have to be very precise as a seller which is one reason higher risk investors should probably never (or rarely) sell. You can read more about this here: https://brighterdayslifecoaching.com/investment-tools/ (just scroll down to item 1 under “KEY HISTORICAL STOCK MARKET TRENDS”).
The best investing strategy to use will change over time depending on your investment risk category, and on those somewhat rare occasions when several overall stock market indicators signal extreme lows. So, it’s very important, at least on a periodic basis, to maintain awareness of which investment risk category you fall into as well as remaining cognizant of when the overall stock market is approaching extreme lows. Many investors fail to maintain this awareness or make these adjustments resulting in losing much of their life savings (e.g., remaining a high-risk investor when lower risk is appropriate) or not growing their life savings as much as needed (e.g., remaining a low-risk investor when higher risk is appropriate). If you aren’t sure what your investment risk category is, you can find it here: https://brighterdayslifecoaching.com/investment-tools/
Here are a few historical trends which might be helpful to keep in mind: A 3-5% drop in the S&P 500 index generally happens about three times a year, a 10% drop generally happens about once every 1.5 years, and a 20%+ drop generally happens about twice every five years. So, the deeper the drop you wait for before buying, the higher the likelihood you’ll miss a significant rebound. You can read more about this here: https://brighterdayslifecoaching.com/investment-tools/ (just scroll down to item 2 under “KEY HISTORICAL STOCK MARKET TRENDS”).
You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing: https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/.
Also, you can follow all of my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities
I wish you much investing success for 2026 (and beyond!).
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