Spotting The Top

unusual options trades and unusual options volume

Since March 6th, 2009 the stock market has embarked on a once in a lifetime rally, soaring to never seen before highs.

Along the way to record highs, there has been no shortage of top calls.  It seems, for some odd reason, people like standing in front of a 1,000 Ton Locomotive called the S&P500.  Why would you do that?  Instead of embracing the trend, basking in the knowledge that every Central Bank in the world is addicted to the inflation of asset prices, there are 'investors', 'market prognosticators' , bloggers, and the like who enjoy getting run over by a train.  Lucky for them they can somehow survive  getting run over by that figurative train, get up and do it all over again the next week... and the week after that... and the week after that.

The bottom line:

It really comes down to perspective.



Some look at the Policies of the Central Banks  and for some reason think its bearish for the market.   Others look at the 10+ years of unprecedented Central Bank policy and say... If stocks are at record highs because of the Central Banks easy money policies, and those policies are going to stay around a lot longer - than this market is going to make new all time record highs for a lot longer.

The most recent cause for concern was the inverted yield curve.

Inverted Yield Curve – What Were They Saying in 2006 and 2000?

An  inverted yield curve has preceded every recession since the great round rock shortage of 4,000 B.C.    And yet, since the Yield curve 'scare' of 2019, stocks have continued to rally.

Go figure.  Defying an excuse to sell?  Where have we seen that before?  *******Que the sarcastic laugh track*****

This weeks FED meeting gave the market a reason to pause after hitting record highs.  The FED confirmed it is in no rush to cut rates.  Yes you are hearing that right. Stocks at record highs, and the market is expecting a rate CUT!    The FED didn't give it to them yet.. but its coming.   Which means money is going to get even cheaper.   An inflating debt bubble will continue to inflate, and with low interest rates likely going even lower.... debt will continue to grow as well, which means stock prices will continue to climb and ignore the inverted yield curve trigger from a few months ago, just like its ignored every other reason to sell since the lows in March 2009.

What should we be watching for, as far as spotting a top for this market is concerned?

I don't think we will get a 'blowoff' top for this market.   It will be a process.  And even when we do 'top'  I don't think its the 'top'.  The end.  It will just be a more prolonged pull back followed by another bull market.

I covered nearly two years ago what I think will give the red light for the market.  And the good news is, when we see this trigger, the market will be kind enough to give you 6 months before the real downside begins.  And even then, amid a world of central banks handing out first place trophies to all participants, the next pull back will be met with the biggest  central bank response the world has ever seen, one of which will be the FED outright buying the S&P500 to keep asset prices aloft.  Which will likely put a lid on the losses.

However we aren't even close to getting there yet.  For investors with a long term horizon, if you are able to time the pull back...and buy the lows.... great.    Otherwise you are always buying tops and bottoms. Selling when widely followed financials news channel hosts were saying to sell in 2008... that was one of the worst things you could have ever done.   It was actually one of the best times to buy stocks.   However, for those looking to sell when the top is in,  this is what I will be looking for:

When Will It Be Time to Sell?

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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