signs of a market top by X user The Long Investor
Signs of a Market Top:
- Parabolic Market moves in Wave 5
- Bubbles in particular sectors
- High PE Market average
- Large breadth between the price action and the 50 Day/200 Day MA and significantly above the 200 WMA
- RSI above 80
- Sentiment believes ‘they can't lose’
- Wall St aggressively bullish (now)
- Heavily reliant on one sector to carry the market (Semis/Ai) house of cards scenario
- Retail going all in
- Retail largest inflows in decades
- Smart Money adding Safe Havens
- Smart Money going to Cash
- Smart Money going to new markets outside of the US (China)
- Delinquencies at a record high
- 10 Year not following the Rate Cut decrease
- VIX above 38
Does any of this look familiar?
The above is taken from X user The Long Investor post dated 28 December 2024.
I will like to add a few of my own for consideration:
Look at weekly or daily chart intervals. Look at MACD and Chaikin money flow (buying versus selling)
Holding of record cash $320 billion by Berkshire.
"Shoe shine boys" giving tips
Market breadth that is declining (more stocks close at lower price compared to those closed at a gain)
Look beyond S&P500 stock index and check out other indices like Russell 2000 and Wilshire 5000. S&P500 has 30% of its revenue outside of America.
Scroll into details like S&P493 (how the market is doing without the magnificent 7). With top 10 companies contributing to 40% of , it is lobsided.
Look beyond unemployment, GDP & interest rate data like leading economic indicators (LEI) where non financial components are part of the consideration.
When the Federal Reserve drops its interest rate and the market responses with higher mortgage, it is the market highlighting the higher risks associated with loans. We can look into other corporate and consumer credit facility rates for reference.
The market is capable to show both bullish and bearish signals concurrently. The signals can be valid.
I wish you success.
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A healthy correction in overbought overvalued market will be good.
Great article