Home > Articles > Business & Management > Finance & Investing

Prologue to Beat the Market: Win with Proven Stock Selection and Market Timing Tools

Gerald Appel recalls the vicious bear market of 2001-2002, and how the two indicators that signaled that it was time to re-enter the stock market are just as valid today.
This chapter is from the book

A Signal for a New Bull Market Is Given...

The time is September 6, 2002. The stock market is in the final throes of one of the most vicious bear markets in history—a bear market that has already taken the Standard & Poor’s Index down by 47% from its early 2000 peak levels, and which has lopped 77% from the Nasdaq Composite Index.

Pessimism is rampant. Investors have seen serious damage done to their personal savings, to their retirement plans, and to their asset base in general. Many mutual funds have shut down or merged. A war with Iraq looms on the horizon, adding to the general uncertainty.

However, two indicators—indicators that measure the value of stocks compared to the values of alternative investments—flash the all-clear signals that the time has come to enter into the stock market with full force; signals that stocks are once again bargains; signals to buy and to buy now!

And, as matters turned out, these proved to be very timely signals, indeed. The buy signals that these two indicators produced on September 6, 2002, were followed by a market advance that did not come to an end until October 9, 2007. At that time, the Standard & Poor’s 500 Index had risen from 893.92 to 1565.15—a gain of 671 points or 75.1%.

However, by July 13, 2007, three months before the final peak, trouble had begun to appear on Wall Street. A rash of defaults in the mortgage industry had spread to financial institutions across the globe as it became apparent that lenders had extended far too much credit to far too many borrowers who did not have the capacity to repay. As the financial community reeled, losses mounting as a result of a rash of defaults—with major institutions, such as Citicorp, ultimately losing half their value—the stock market turned down, losing 9.4% in just four weeks.

What were the indicators that had placed investors into the stock market in 2002 suggesting at this juncture? They steadfastly retained their bullish status, maintaining their favorable outlook throughout the July–August 2007 decline. This optimism was rewarded as the Standard & Poor’s 500 Index recovered to new highs on October 9, less than two months after the lows of August.

The past history of these “value indicators” had been marked by stock market declines of up to 17%, even while their status remained favorable. These measures of stock market value were not designed for in-and-out trading but rather to alert investors as to when stocks represented or no longer represented favorable value. History has shown that when stocks are still “inexpensive,” market declines do not last for very long.

Following the October recovery, which brought many popular market indices to new all-time highs, pessimism quickly returned, with subsequent market declines reaching the area of 18% in January 2008—still barely within but threatening to violate past boundaries of risk.

However, stocks DID recover, after one final dip in March, reclaiming by mid-May most of the losses taken at the start of the year.

As matters had turned out, the stock market had found support within the normal range of market fluctuation implied by the indicator set that had called, with such accuracy, the end of the bear market, and had kept its followers in stocks all through the 2002–2008 period. These indicators had been bent by the “sub-prime credit crisis.” However, they did not break.

The two indicators that measure stock market value have been combined into one key indicator: the “Twin Bond–Stock Valuation Model,” which has been generating accurate signals since 1981. You will learn in this book all you need to know to assess the stock market by way of this timing model so that you, too, can identify key market turning points of the sort that took place during September 2002.

Please join me as we explore the procedures involved.

Gerald Appel

July 2008

InformIT Promotional Mailings & Special Offers

I would like to receive exclusive offers and hear about products from InformIT and its family of brands. I can unsubscribe at any time.


Pearson Education, Inc., 221 River Street, Hoboken, New Jersey 07030, (Pearson) presents this site to provide information about products and services that can be purchased through this site.

This privacy notice provides an overview of our commitment to privacy and describes how we collect, protect, use and share personal information collected through this site. Please note that other Pearson websites and online products and services have their own separate privacy policies.

Collection and Use of Information

To conduct business and deliver products and services, Pearson collects and uses personal information in several ways in connection with this site, including:

Questions and Inquiries

For inquiries and questions, we collect the inquiry or question, together with name, contact details (email address, phone number and mailing address) and any other additional information voluntarily submitted to us through a Contact Us form or an email. We use this information to address the inquiry and respond to the question.

Online Store

For orders and purchases placed through our online store on this site, we collect order details, name, institution name and address (if applicable), email address, phone number, shipping and billing addresses, credit/debit card information, shipping options and any instructions. We use this information to complete transactions, fulfill orders, communicate with individuals placing orders or visiting the online store, and for related purposes.


Pearson may offer opportunities to provide feedback or participate in surveys, including surveys evaluating Pearson products, services or sites. Participation is voluntary. Pearson collects information requested in the survey questions and uses the information to evaluate, support, maintain and improve products, services or sites, develop new products and services, conduct educational research and for other purposes specified in the survey.

Contests and Drawings

Occasionally, we may sponsor a contest or drawing. Participation is optional. Pearson collects name, contact information and other information specified on the entry form for the contest or drawing to conduct the contest or drawing. Pearson may collect additional personal information from the winners of a contest or drawing in order to award the prize and for tax reporting purposes, as required by law.


If you have elected to receive email newsletters or promotional mailings and special offers but want to unsubscribe, simply email information@informit.com.

Service Announcements

On rare occasions it is necessary to send out a strictly service related announcement. For instance, if our service is temporarily suspended for maintenance we might send users an email. Generally, users may not opt-out of these communications, though they can deactivate their account information. However, these communications are not promotional in nature.

Customer Service

We communicate with users on a regular basis to provide requested services and in regard to issues relating to their account we reply via email or phone in accordance with the users' wishes when a user submits their information through our Contact Us form.

Other Collection and Use of Information

Application and System Logs

Pearson automatically collects log data to help ensure the delivery, availability and security of this site. Log data may include technical information about how a user or visitor connected to this site, such as browser type, type of computer/device, operating system, internet service provider and IP address. We use this information for support purposes and to monitor the health of the site, identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents and appropriately scale computing resources.

Web Analytics

Pearson may use third party web trend analytical services, including Google Analytics, to collect visitor information, such as IP addresses, browser types, referring pages, pages visited and time spent on a particular site. While these analytical services collect and report information on an anonymous basis, they may use cookies to gather web trend information. The information gathered may enable Pearson (but not the third party web trend services) to link information with application and system log data. Pearson uses this information for system administration and to identify problems, improve service, detect unauthorized access and fraudulent activity, prevent and respond to security incidents, appropriately scale computing resources and otherwise support and deliver this site and its services.

Cookies and Related Technologies

This site uses cookies and similar technologies to personalize content, measure traffic patterns, control security, track use and access of information on this site, and provide interest-based messages and advertising. Users can manage and block the use of cookies through their browser. Disabling or blocking certain cookies may limit the functionality of this site.

Do Not Track

This site currently does not respond to Do Not Track signals.


Pearson uses appropriate physical, administrative and technical security measures to protect personal information from unauthorized access, use and disclosure.


This site is not directed to children under the age of 13.


Pearson may send or direct marketing communications to users, provided that

  • Pearson will not use personal information collected or processed as a K-12 school service provider for the purpose of directed or targeted advertising.
  • Such marketing is consistent with applicable law and Pearson's legal obligations.
  • Pearson will not knowingly direct or send marketing communications to an individual who has expressed a preference not to receive marketing.
  • Where required by applicable law, express or implied consent to marketing exists and has not been withdrawn.

Pearson may provide personal information to a third party service provider on a restricted basis to provide marketing solely on behalf of Pearson or an affiliate or customer for whom Pearson is a service provider. Marketing preferences may be changed at any time.

Correcting/Updating Personal Information

If a user's personally identifiable information changes (such as your postal address or email address), we provide a way to correct or update that user's personal data provided to us. This can be done on the Account page. If a user no longer desires our service and desires to delete his or her account, please contact us at customer-service@informit.com and we will process the deletion of a user's account.


Users can always make an informed choice as to whether they should proceed with certain services offered by InformIT. If you choose to remove yourself from our mailing list(s) simply visit the following page and uncheck any communication you no longer want to receive: www.informit.com/u.aspx.

Sale of Personal Information

Pearson does not rent or sell personal information in exchange for any payment of money.

While Pearson does not sell personal information, as defined in Nevada law, Nevada residents may email a request for no sale of their personal information to NevadaDesignatedRequest@pearson.com.

Supplemental Privacy Statement for California Residents

California residents should read our Supplemental privacy statement for California residents in conjunction with this Privacy Notice. The Supplemental privacy statement for California residents explains Pearson's commitment to comply with California law and applies to personal information of California residents collected in connection with this site and the Services.

Sharing and Disclosure

Pearson may disclose personal information, as follows:

  • As required by law.
  • With the consent of the individual (or their parent, if the individual is a minor)
  • In response to a subpoena, court order or legal process, to the extent permitted or required by law
  • To protect the security and safety of individuals, data, assets and systems, consistent with applicable law
  • In connection the sale, joint venture or other transfer of some or all of its company or assets, subject to the provisions of this Privacy Notice
  • To investigate or address actual or suspected fraud or other illegal activities
  • To exercise its legal rights, including enforcement of the Terms of Use for this site or another contract
  • To affiliated Pearson companies and other companies and organizations who perform work for Pearson and are obligated to protect the privacy of personal information consistent with this Privacy Notice
  • To a school, organization, company or government agency, where Pearson collects or processes the personal information in a school setting or on behalf of such organization, company or government agency.


This web site contains links to other sites. Please be aware that we are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of each and every web site that collects Personal Information. This privacy statement applies solely to information collected by this web site.

Requests and Contact

Please contact us about this Privacy Notice or if you have any requests or questions relating to the privacy of your personal information.

Changes to this Privacy Notice

We may revise this Privacy Notice through an updated posting. We will identify the effective date of the revision in the posting. Often, updates are made to provide greater clarity or to comply with changes in regulatory requirements. If the updates involve material changes to the collection, protection, use or disclosure of Personal Information, Pearson will provide notice of the change through a conspicuous notice on this site or other appropriate way. Continued use of the site after the effective date of a posted revision evidences acceptance. Please contact us if you have questions or concerns about the Privacy Notice or any objection to any revisions.

Last Update: November 17, 2020