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Source: Yahoo Finance

Category: Markets, Technical Analysis, Video

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12 Responses to “Video: Signs of a Stock Market Top?”

  1. 4whatitsworth says:

    I am definitely not a technician but curious as to the definition of a top if the market stays flat for some time (a year or more.. How about 5-10 years) would that be a top?

    Personally I think we are finally in a genuine recovery process however the real recovery is not going to be quick or painless. Good things are happening it looks like wages may finally be rising and real work is once again being encouraged (sort of). Unfortunately for stocks labor cost is their number one variable in making a profit.

    The only scenario I see where wages could go up and so could profits would be tax reform. If taxes went down as wages went up that would be the magic formula IMO. I just got back from New Zealand it is interesting to see a country that has not wrecked itself yet. New Zealand has no tax on capital gains and free baseline public health care. I know no one actual pays the tax rates here in the US because there are so many loopholes so let’s do away with those as well.

    I suppose a commodity crash could bring on a similar buy short lived result.

  2. RC says:

    Commodities crash will definitely be a shot in the arm for the economy. Imagine what an incredible stimulus the economy can get if the gas price went to $2.50 a gallon!! This is not some pie in the sky idea. As longs are out – rather forced out – of Oil market due to the triple whammy of demand destruction in China ,constantly rising equities and an announcement on Keystone pipeline, Oil prices will crater taking gasoline prices down.

    • Commodities crashes usually occur because of plummetting demand for the resource — THAT might be indicative of a down turn or recession

      • RC says:

        I agree that in “normal” times crashing commodities would be indicative of coming recession, but the last 12 to 13 years commodities boom’s major cause was insatiable demand from China and a slowing China should mean lower demand of commodities from China – a “normalization”, if you will, of the commodities market.

        Vehicular miles driven here in US is way below the pre-great-recession peak, along with fleet with higher fuel efficiency (some more than 30% more efficient) means remarkable low demand of gasoline, yet we are still paying more or less the same price at the pump. We can have a lot lower gas price without it being an indication of an impending recession.

      • RC says:

        We can see that Baltic Dry Index even after a dip in the January, is still higher than 2012 and 2013 which could be seen as one indication that global growth is not at elevated risk. At least at this point.

  3. Frwip says:

    Question on signs 1, 2 and 4.

    How are those indicators affected by money going increasingly into broad index funds (assuming it is the case lately) ?

    Wouldn’t that degrade their signal/noise ratio ?

    • I dont think so — if you purchase index funds, the manager is taking inflows and buying the underlying stocks.

      • Frwip says:

        Yes, but index funds buy the underlying stocks with a fixed allocation. They add volume in the market but they don’t add information in the market about the relative worth of the various stocks within the index.

        They only signal to the market as a whole (only talking about broad indexes) and they don’t really participate in differential indicators like those three. More volume but less active allocation, less ‘information’.

    • icantdance says:

      Yes I had the same thought.

      Johnny-come-latelies are buying ETFs pushing up indexes broadly.

      Similar to how portfolio insurance caused broad decline in market in 1987, but on the upside!

  4. RobertKerr says:

    You don’t need technicals to see that the US equity markets are disconnected from US macro economy and have been for well over two years. How does this play out? Probably the same way our last disconnected bull run ended: quickly, badly, severely. We either learn from history, or we repeat our mistakes.

    • There have been many regression anlyses looking at the correlations between the economy and equity markets — outside of the huge booms & busts, its modest at best.

  5. [...] Video: Signs of a Stock Market Top? | The Big Picture for video Source: Yahoo Finance. … from history, or we repeat our mistakes. Log in to Reply · Barry Ritholtz says: March 14, 2014 at 6:19 am. There have been many regression anlyses looking at the correlations between the economy and equity markets — outside of the huge booms & busts, its modest at best. Log in to Reply … Up For My Newsletter. Get subscriber only insights and news delivered by Barry every two weeks. Get The Big Picture blog updates via … [...]