Guru Grades

Clif Droke's Contrarian Triangulation (Last Updated 1/5/09)

As suggested by reader David Zaitzeff , we evaluate here the overall U.S. stock market forecasts from the commentaries of Clif Droke, available since late May 2003. Clif Droke uses parabolic cycles as an overlay for more specific analyses to predict market behavior, all from a contrarian perspective. He frequently gauges the "Wall of Worry." He notes that: "Cycles should never be viewed as anything more than a rough guideline, or road map if you will, for navigating the markets...cycle theory should always be combined with a comprehensive study of market internals (i.e., technical analysis) as well as fundamental analysis, market psychology analysis, and an analysis of market liquidity." The chart below extracts highlights from his commentaries on the direction of the overall U.S. stock market and shows the performance of the S&P 500 index over the 5, 21, 63 and 254 trading days after the publication date for each item. Red plus (minus) signs to the right of specific items indicate those the market subsequently proves right (wrong). We conclude that:

• Clif Droke frequently examines the outlooks for real estate, gold, silver and the dollar. We do not evaluate those forecasts.
• His forecasts for stocks are mostly intermediate range, which we interpret as one to three months, but he sometimes specifies shorter or longer timeframes. We test his forecasts accordingly.
• Mr. Droke sometimes makes complex, multi-step forecasts which prove to have both correct and incorrect components. In a few cases, we evaluate a forecast with "0" and grade him both right and wrong.
• Based on subsequent stock market performance and our judgments about his forecasts for overall U.S. stock market direction, Clif Droke has been right 49% of the time, about average accuracy rate. His forecast sample size is modest to moderate, as is our confidence in this conclusion.

In summary, Clif Droke's synthesis of technicals, fundamentals, sentiment and liquidity with cycles results in about average stock market forecasting accuracy. Confidence in this conclusion is modest to moderate.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.

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