As part of the development for my S&P500 Volatility Timing Model, I test several data sets and build several tweaked models. What I’m interested in in is finding the “outliers”, also known as the financial asteroids. These represent great opportunities for me because I usually buy either mutual funds, ETF’s, or stocks in our 401k when they happen.
In the case of the May 10, 2007 selloff, we were hit by a small financial meteor. Take a look at the posted pic, you’ll can see a green dot which is “out there” from the regular cluster of data points. That was the financial meteor, the outlier! However, based on my model it was a small buying opportunity, nothing to get overly excited about.
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