"You can't time the market."

It's one of the most often-repeated investment phrases. And it's wrong. History has shown that a simple ratio delivers impressive market gains. In fact, it appears when most investors have little desire to buy stocks.

Let me explain.

Every week, the American Association of Individual Investors (AAII) asks its members to answer one simple question in an online survey: Regarding the future direction of the stock market, are you bullish, bearish or neutral? Over the long haul, investors feel bullish about 39% of the time, and at times of maximum optimism, more than half of respondents will answer with a bullish response.

Yet at rare pressure points in the market, what Sir John Templeton once cited as "the point of maximum pessimism," the entire crowd can turn bearish. Indeed at various points over the past three decades, the vast majority of respondents in the AAII survey express extreme bearishness. Presumably, such investors are selling stocks at these times and moving to cash. And that has proven to be a big mistake.

I've tallied the market performance whenever the crowd turns bearish, and on almost every occasion the market has gone on to post solid short- and mid-term gains.

Guess what? It just happened again. In a recently-completed survey, the number of investors in the bullish camp fell handily below 25%. In the most recent week, the sentiment rebounded a bit , to around 25%.

And history says it's time to buy.



Read more: http://www.nasdaq.com/article/invest...#ixzz3fHMw9CO1