Indicator with good long-term record has flashed a buy signal

If the trend is your friend, as the Wall Street cliché goes, then the stock market has been an incredibly friendly place of late.

I say this not just because the stock market, with seemingly little effort, was able to shrug off last Friday's news about Goldman Sachs' legal troubles, with the Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 11,135, +9.68, +0.09%) gaining 73 points on Monday and another 25 on Tuesday.

What I have in mind is a rare buy signal that was generated a couple of weeks ago by a trend-following indicator with a good long-term record. Prior to the recent buy signal, there had been only 12 of them since 1967.

And two of those 12 prior buy signals occurred in the last 12 months alone. In other words, between 1967 and March 2009, this indicator gave just 10 buy signals -- an average of just one every 4.3 years. Since March 2009, in contrast, they have averaged once every four months or so. (more)