Editor's note: At market peaks, investors grow euphoric and greedy.

Today, they're scared... But Steve Sjuggerud says they shouldn't be.

Today's Masters Series is excerpted from the brand-new November issue of True Wealth Systems. In it, he shares three more indicators that will tell us when a recession – and a Melt Down – are inevitable...

No Recession = No 'Melt Down'

By Steve Sjuggerud, editor, True Wealth Systems

I can tell you exactly when the Melt Up will end... and when the Melt Down will arrive.

No, I can't tell you the exact day. But I can tell you the circumstances we'll see, and I can put together a simple "script" for how things will go as we near the next bust.

It's not just the five indicators we discussed yesterday. Those will tell us when the market's fundamentals are weakening. But there's more to it than that...

If you want to know when stocks will crash, look at the economy. Major stock market crashes always occur during recessions.

What happens in the economy affects the markets. Stocks have a hard time rising when there's true economic turmoil.

Because of that, it makes sense that the absolute worst economic times have led to the absolute worst stock market crashes – specifically, the Great Depression and the Great Recession.

But even looking outside of these instances, every major market fall has happened when the economy was in terrible shape. In total, we've seen seven stock market crashes of 40%-plus...

• Stocks fell 86% from the peak in 1929 to the bottom in 1932.
• We saw another 55% bust from 1937 to 1938.
• The Great Depression included two more major falls of 45% and 41%.
• Stocks fell 48% during the 1970s as inflation battered the U.S. economy.
• Stocks fell 49% from 2000-2002 following the tech bubble.
• And of course, the market crashed 57% during the Great Recession.

All of these 40%-plus declines had a common theme... They happened when the U.S. economy was in a recession.

So, my friend, while I'm excited about the Melt Up, I'm also interested in understanding the Melt Down that will follow. Fortunately, we don't have to worry. We know that the next bust will happen alongside a recession. And I'll spoil the state of the U.S. economy up front...

There's no recession in sight in the U.S. That means we have a green light to go "all in" on the Melt Up.

Today, we'll share three reasons why the economy is fine. These indicators have fantastic track records of predicting recessions. None of them are flashing warning signals now.

Let's quickly walk through all three of these recession indicators...

We're not in danger of a full-blown recession. And that means stocks can soar from here. To prove that to you, we'll look at three different indicators...

• Unemployment
• The Leading Economic Index (LEI)
• Interest rates

These three measures look at different parts of the economy. And they all have fantastic track records of spotting recessions ahead of time.

Let's start with unemployment...

In short, low unemployment is good and rising unemployment is bad. Take a look at the year-over-year change in the unemployment rate in the chart below. The gray bars indicate periods of recession...

Please note, this is not the unemployment rate – it is the change in the unemployment rate.

When the line moves above 0%, it shows an increase in the unemployment rate over the past year. That's bad. That means unemployment is rising... and that the economy is weakening. These increases have occurred before nearly every recession since the late 1940s.

We've seen some false signals along the way. But it's clear that a swift move higher is likely a sign of a coming recession.

The unemployment rate in the U.S. has been falling for years. It peaked at 10% in 2009 and sits at 3.7% today. That's the lowest post-recession reading we've seen. So clearly, unemployment isn't a concern today.

That won't last forever, of course. But the unemployment picture will need to change dramatically before the U.S. sees another recession. We're not there yet.

The next indicator we're watching is the Leading Economic Index (LEI)...

It comes from an independent research group called the Conference Board.

The Conference Board's LEI for the U.S. looks at 10 different economic indicators – everything from employment, to housing, to interest rates. It's as close to an all-encompassing figure as anything else that exists.

This indicator also has an incredible track record of predicting recessions.

As you can see in the chart below, every recession of the past 50 years happened after the year-over-year percentage change in the LEI went negative...

Again, the chart shows the year-over-year change of the LEI. And when that goes negative, look out... a recession is coming.

Right now, this index is showing positive growth. We're nowhere near zero today, let alone going negative. That means the economy is healthy.

We'll be worried when the LEI begins to fall... eventually leading to a negative year-over-year return. That will be a sign of a recession and tough times ahead. But it's not happening right now. We're "all clear" on this indicator.

The last piece we'll cover is the most important one. It's interest rates...

There are plenty of ways to look at the state of the economy. But most folks don't really think of interest rates when it comes to economic analysis. Still, there's something beautiful about interest rates.

You see, every piece of economic data – hard numbers and market sentiment – affects interest rates. And by looking at them the right way, we have a head start on knowing when a typical recession will arrive in the U.S.

Interest rates tell us a lot. Short-term interest rates, for example, tell us what's going on with inflation, Federal Reserve policy, and economic growth... all in a single number.

It's incredible how much information about the current economic situation is stored in short-term interest rates. But you have to look a bit deeper to learn a lot from interest rates.

You see, we're not looking at a single interest rate to determine when a recession is on the horizon. Instead, we want to look at the "spread" between short- and long-term rates.

Specifically, we look at the spread between two-year and 10-year U.S. Treasury bonds.

The "spread" is simply the interest rate on 10-year government bonds minus the rate on two-year government bonds. It's that simple. But the spread tells us an incredible amount about what's going on in the economy.

In normal times, investors demand higher yields for buying longer-dated bonds. Obviously, a 10-year bond locks your money up for much longer than a two-year bond. And that time (and additional risk) means investors earn higher interest rates.

This is NOT the case when a recession approaches...

When a recession approaches, this interest-rate spread turns negative.

The main driver of the interest-rate spread going negative (or "inverting") is the Federal Reserve. The Fed controls short-term interest rates. And it has a large influence on two-year government bonds as well. (This effect lessens as the bond duration increases.)

The Fed tends to hike rates late in an economic boom. The goal is to cool down an overheating economy. And often the result is a swift rise in two-year government-bond interest rates.

Historically, when two-year government bonds begin paying more than 10-year government bonds, a recession is around the corner.

What's great about this indicator is that it tends to happen before the recession actually begins. Our back-testing indicates this inversion tends to happen about a year before recessions begin, on average.

The chart below shows this interest-rate spread. The gray bars indicate recessions...

This is a leading indicator. The average signal happened roughly a year before the U.S. entered a recession. And the last time it flashed a false signal was more than 50 years ago.

This negative interest-rate spread is the most powerful recession predictor we've found. It helps us foresee an economic downturn. And that tells us when a stock market Melt Down is coming.

Now, the interest-rate spread has been falling. The Fed has been hiking interest rates in recent years. And we are nearing "zero" on the chart above. But we're not there yet. And even when we hit zero, we could still have another year of good times ahead.

Importantly, this jives with our other two indicators. And when you put all three together, the takeaway is clear...

We're not at risk of a recession today.

The investment implications from this idea are massive...

Remember, the worst bear markets we've seen have been during a recession. Every 40%-plus decline in U.S. stocks happened when the economy was hurting. The only time stocks fell more than 30% while the economy wasn't in a recession was in 1987... when stocks fell 23% in a single day but ended up positive for the year!

Of course, history never repeats itself. We can't know exactly how things will go from here. But we do know this...

The U.S. economy is nowhere near a recession today, based on our recession indicators. As such, a major stock market crash is unlikely from here.

That means we have a green light to be bullish and to stay long as this Melt Up unfolds.

Please stop worrying about the Melt Down. We're safe from a stock market bust, based on a century of data. And that means we want to stay invested now.

Good investing,

Steve Sjuggerud

Editor's note: The Melt Up is still on track... and last month's pullback gave investors an incredible entry point. That's why he's more excited than ever to share his fully allocated, brand-new Melt Up Portfolio with you. Right now, you can gain immediate access – plus collect $8,500 in free extras – just for signing up. But don't delay... this offer expires at midnight. Get the details here.