As we grind higher and higher, here are a few things that I am looking for that will show that the top is near:
1. A chase for performance, gravitating towards the higher beta outperformers like AAPL. Tech stocks go up disproportionately. Check.
2. Lagging transportation stocks, and lagging lower beta stocks. Check.
3. A break to a new marginal high that gets the crowd bullish and believing in 1500, etc. Sentiment indicators indicating lots of bullishness. Not there yet.
4. A shot of good news that get those on the sidelines into the market, an ECB bond buying program announcement, a China stimulus package, or QE3. Still waiting.
5. Increase in volatility while the market goes nowhere. Not there yet.
So we have 2 out of 5 on the checklist, once we get 4 out of 5, I will be looking more actively to sell short.
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2 comments:
could today have been a top?
I think we have a short term top, but we don't have all the elements that I'm looking for to make a long term top. Tops take a lot longer than bottoms, so I'm in no rush to short this reversal.
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