By: Steve Smith
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.