It is incredibly hard to make money going short. Even if you are right about the direction, most short positions require interest payments to hold, or have some sort of decay built into the structure. So timing is everything and even then, if the underlying security slowly grinds down (instead of a quick abrupt move) you could still lose if the interest/decay on the short position outruns the downward movement on the underlying.

I have been actively trading in the market for a little over a year now, and while winning on a short position is probably the most satisfying trade for me, the overwhelming majority of those trades are losses and at this point I mostly treat them as hedges. I suspect that is true for most market participants as well.

Even if this was a reliable signal for most of us it shouldn't change anyway. Timing the market is hard, so if you have a job keep investing in your retirement accounts and let dollar cost averaging work it out - odds are you are buying at fire sale prices. If you are one of those who lose your job - it doesn't matter much if the economy is good or bad, you need to adjust a lot of things (even in the best of times sometimes by chance you can be out of work for a long time)

If you are the manager of a mutual fund you can take useful action on signals like this if you can figure out what they mean. Most people don't have enough money to be worth trying to take action.

"Signals" are rubbish. The market is irrational and will change its mind at random.

This is, however, one of many indicators of an overall wobbling system. It would be a good time, not make the line go up, but to look for ways to stabilize the economy as a whole.

Which is unfortunately a hard question. One could theorize that we should do different things than the thing we've been doing for the past year or so, but of course there will be many who say that we just haven't done it hard enough yet.