Pu Shen, an economist at the Federal Reserve Bank of Kansas City, wrote "Market Timing Strategies That Worked" in 2002. 

ABSTRACT

 

In this paper, we present a few simple market-timing strategies that appear to outperform the

“buy-and-hold” strategy, with real-time data from 1970 to 2000.  Our focus is on spreads between the E/P

ratio of the S&P 500 index and interest rates.  Extremely low spreads, as compared to their historical

ranges, appear to predict higher frequencies of subsequent market downturns in monthly data.  We

construct “horse races” between switching strategies based on extremely low spreads and the market

index.  Switching strategies call for investing in the stock market index unless spreads are lower than

predefined thresholds.  We find that switching strategies outperformed the market index in the sense that

they provide higher mean returns and lower variances.  In particular, the strategy based on the spread

between the E/P ratio and a short-term interest rate comfortably and robustly beat the market index even

when transaction costs are incorporated

In this paper, we present a few simple market-timing strategies that appear to outperform the “buy-and-hold” strategy, with real-time data from 1970 to 2000. Our focus is on spreads between the E/P ratio of the S&P 500 index and interest rates. Extremely low spreads, as compared to their historical ranges, appear to predict higher frequencies of subsequent market downturns in monthly data. We construct “horse races” between switching strategies based on extremely low spreads and the market index. Switching strategies call for investing in the stock market index unless spreads are lower than predefined thresholds. We find that switching strategies outperformed the market index in the sense that they provide higher mean returns and lower variances. In particular, the strategy based on the spread between the E/P ratio and a short-term interest rate comfortably and robustly beat the market index even when transaction costs are incorporated

Source: http://www.kansascityfed.org/publicat/reswkpap/pdf/rwp02-01.pdf