Analyst Called Market Bottom, Now Up 38%; Reveals 2026 Outlook | Milton Berg

Key Concepts

• Proprietary Market Model: Milton Burke (MB Advisors) has developed a highly complex market model utilizing over 30,000 indicators and nearly 2,000 models built on historical data since March 4th, 1957, to identify potential market turning points.
• Oversold Bounce vs. New Bull Market: Despite recent market gains, Burke cautions against interpreting the rally since the November 20th low as a significant bull market, characterizing it as an “oversold bounce.”
• Inflation Control Priority: Burke advocates for the Federal Reserve to prioritize controlling inflation, targeting 0% rather than the current 2-2.9% range.
• Emotional Trading Mitigation: The model aims to remove emotional biases from trading by providing objective buy/sell signals based on market action, capitalizing on inefficiencies.
• Simple Retail Strategy: A core strategy for retail investors involves buying on the first buy signal and holding until an 8% decline in the S&P 500, then waiting for the next signal.
• Historical Profitability: Backtesting demonstrates significant profitability, with 90.9% of long S&P trades being profitable and an average return of 21.7% per trade.

---

Market Overview & Federal Reserve Policy (Part 1)

The discussion begins with a review of recent market activity, identifying a bear market ending between April 4th and August 13th, 2024, which generated over 50 buy signals. While acknowledging the positive market reaction to recent Federal Reserve policy – specifically, reserve management treasury bill buying to manage liquidity – Milton Burke believes the Fed should prioritize controlling inflation, ideally targeting 0% rather than the current 2-2.9%. He notes that easing monetary policy isn’t always bullish, referencing the 2008-2009 decline. Burke maintains a cautious long-term outlook, anticipating a potential “bubble pop” or crash despite recent gains, believing current market valuations are overpriced and leverage is excessive.

The Proprietary Market Model – Development & Backtesting (Parts 1 & 2)

Milton Burke’s proprietary market model, developed over 10 years, is not based on a single indicator but on thousands of models created by analyzing over 30,000 indicators and historical data dating back to March 4th, 1957 (the start of the S&P 500 index). The model identifies rare combinations of indicators that historically coincide with market turning points. Extensive backtesting has validated its performance, demonstrating success in identifying buying opportunities during past market declines, including the bunker hunt collapse (1980), the 1987 crash, the 2000-2002 bear market, the 2008 financial crisis, and the COVID-19 crash (2020). Historical signals appearing between April 4th and August 13th have precedent, occurring on 104 previous dates.

Model Strategies & Performance Metrics (Part 2)

The model’s core strategy for retail investors is to buy on the first buy signal and hold until the S&P 500 declines by 8% or more, then wait for the next buy signal. Institutional clients utilize more complex strategies involving leverage and options (selling puts). Backtesting from 1957 reveals that 90.9% of long S&P trades were profitable, with an average gain of 21.7% per trade. Investment time is allocated 80.8% to the S&P and 20% to T-bills, yielding an overall average gain of 18.5% compared to the S&P 500’s 10.9% over the same period. T-bills returned an average of 6% during periods out of the market, contributing to a 95.4% overall client success rate. Specific examples include outperforming the S&P in 1962 (model up 18.55% vs. S&P down 8.83%) and 1974 (model up 20.1% vs. S&P down 26.63%).

Projections & Future Outlook (Part 2)

Projections generated in April and May 2020, based on multiple signals, indicated a median minimum S&P 500 projection of 6504 (April) and 7158 (May), with median maximums of 7042.87 (April) and 8086 (May). The median projection of 6400-7135.82 had not yet been met at the time of the discussion, suggesting further upside potential. Burke also presented data demonstrating the model’s profitability even in the historically stagnant Japanese market.

Core Philosophy & Accessibility (Part 2)

Burke argues that the primary obstacle to successful investing is emotion, and his model is designed to overcome this by providing objective signals based on market action. He challenges the academic view that markets cannot be modeled, asserting that inefficiencies exist and can be exploited. He plans to launch a retail newsletter priced at $10/month, providing buy/sell signals based on the 8% decline rule, and a higher-tier subscription ($1,000/month) for more sophisticated investors. He can be found on Twitter (@bergmilton) and through his website (www.miltonberg.com).

---

Conclusion

Milton Burke’s market model presents a data-driven approach to investing, emphasizing the importance of historical analysis and removing emotional biases. While acknowledging the potential for a market correction, the model’s backtesting results and current signals suggest continued upside potential. The model’s core strategy, particularly the 8% decline rule for retail investors, offers a simplified yet potentially effective method for capitalizing on market inefficiencies and achieving long-term profitability. The emphasis on controlling inflation and recognizing market overvaluation provides a cautious yet optimistic outlook for investors willing to leverage a systematic, historically-validated approach.