Investing Advice: 7 Reasons the Market Has Peaked

Posted On January 29, 2018 1:59 pm

Calling market tops is like trying to catch falling knives; it can be both a foolish and dangerous endeavor.  But that doesn’t make any less tempting to try, especially as the rewards, both monetary and in terms of bragging rights, can be immense. Today’s investing advice will examine why one investor is making their call right now.

Recently, Steven Place decided to step up to plate with his 7 Reasons Why I’m Calling a Market Top.

I think he’s self-aware and not necessarily truly bearish, nor is he certain that the market has peaked. Rather, Place is using this as an exercise to list some of the items to keep an eye on.  Here’s his helpful list of investing advice:

I guess it’s time to throw my hat into the ring.

I’ve tried my very, very best to keep to the trend, but we’re now seeing many, many signs in this market that lead me to believe that a near term top will come about within the next week.

The market is undergoing a parabolic rise… a blow off top with price action we haven’t seen in over 20 years.

I’ll be focusing on the S&P 500, but the same premise exists for the Nasdaq and the DJIA… but it does NOT for the Russell 2000 index.

We’re due for a drop. Here’s my 7 reasons why it is just around the corner.

The S&P 500 now has 4 consecutive weeks above its upper Bollinger Bands. Normally I would say “wow that’s crazy it hasn’t happened in forever!”

Except for the fact that it did happen. Recently. Like about a month ago… where we had 5 weeks in a row above the upper BB.

The time before that?


2. The current weekly RSI is sitting at 90.50.

Every time I look at this chart, my eyes narrow and my head cocks to the side a bit.

I think “really?”

To put some context on it, the RSI is bounded between 0 and 100.

70 and 30 tend to denote statistically stretched areas.

On individual stocks, a reading of 90 doesn’t happen often… normally it’s follows a catalyst like earnings or an FDA event.

To see it on a broad market index, well…

Ever. In the history of the S&P.

It hasn’t happened.

The the last time the weekly RSI was this high was back during the bull run in the early 90’s, but the current reading massively eclipses this one.

3. Weekly 10 Day Returns Largest in Current Cyclical Bull Market

This chart shows the 10-week returns for the S&P 500, which currently sit just above 11%.

Now there have been other times we’ve seen this reading higher, but they generally come after a market pullback. To have an extension of this magnitude as we run into all time highs tells us that the market is currently parabolic.

Read the rest here.

 Related: Learn How a Little Patience Pays off in Options Trading

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About author

Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

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