This rule applies to the DOW Jones Industrial average and so it can be skewed a little bit for the emerging markets. Also, the fact to be taken into consideration is that DOW just has old economy stocks and no tech stocks.
Basically, this rule states that
sum of
Inflation and
P/E of the
Index determines how the stock market should move. If its
greater than 18, then the
stock market moves down, if its
less than 18, the stock market will move up.