that's the hard part, getting back in. The bottom cannot be timed so starting to DCA when negative sentiment is highest is an option. It's a judgement call. The other option is to wait until economic indicators turn positive, then DCA back in. You will miss some of the upside if you wait
until the economy picks up.
Why not look at the sentiment Indexes? Capitulation is an emotional and fear driven event.
Quote: Might this bear market nevertheless bottom out without capitulation taking place? To gain insight into this question, I analyzed all bear market bottoms since 1965, using the definition used by Ned Davis Research, the institutional research firm.
I then analyzed the behavior of four different sentiment measures on the occasion of those bottoms (if data were available): In addition to the HSNSI, I focused on (1) the well-known survey of newsletter sentiment conducted by Investors Intelligence, (2) the survey of individual investors conducted by the American Association of Individual Investors, and (3) the CBOE's Volatility Index (.VIX), which reflects expectations of future volatility among options traders, and which is often referred to as an "investor fear gauge."
Incredibly, I found that, on average across these past bear markets, sentiment hit its lowest point 15 calendar days prior to the actual day of the bottom. That's impressive -- very few other market-timing indicators come this close.
Full story: https://news.fidelity.com/news/article. ... ing-stocks
AAII index: Brief Description http://tal.marketgauge.com/dvmgpro/UGui ... art=AAIISR
Current application / analysis
This is a quote from: http://www.tradersnarrative.co....-2332.html
But the most fascinating and historic reading comes to us from the AAII weekly survey. The latest American Association of Individual Investors (AAII) data shows what can only be describe as total and utter capitulation. As of Wednesday (March 4th, 2009) 70% expected the market to continue to fall, while only 19% continue to see better times ahead.
The only data point from the AAII survey that approaches this level of gloom is back in October 19th, 1990 when a paltry 13% of respondents were bullish and 67% were bearish. End Quote
Capitulation would be the only predictor of a market bottom that I can think of.