The Biggest Triple Top In Trading History
March 9, 2013 at 2:39 PM (QQQ)(DIA)(SPY)(GLD)(BAC)
S&P 500 | The Biggest Triple Top In The History Of Wall Street
We talked about this last night but we need to talk again. It's not only quite possible, it's highly probable that you will never be confronted with a Triple Top in the S&P 500 of this magnitude again in your lifetime. Does this mean you should trade it? It means you need to be aware of it. It means you need to understand the potential ramifications.
Is this a doomsday warning? No, in fact... we could be on the brink of the greatest bull run in history. Do I believe that? Not really. However, if there is one thing I can say that I do know with great certainty, it is this - "anything can happen". There was a phrase coined on a CFRN live broadcast several years ago - "Embrace the possibilities". More than anything, my clarion call today is to encourage you to avoid becoming biased as to the ultimate outcome. To remain neutral, is to remain nimble, which allows you the luxury of participating in whatever unfolds. Both the Bulls and Bears offer very compelling arguments in regards to what lies ahead.
Bullish
The universe of cash and bond investments yield too little to preserve lifetime purchasing power. Cash has never been a successful long-term investment, but in the wake of QE3, with cash yields near zero for the foreseeable future, those with dollars on the sidelines are beginning to understand their plight. If they don’t buy now, when will they?
As the market goes on the first trading day of the year, so goes the week. As the market goes in the first week, so goes the month of January. And as January goes, so goes the year. The S&P 500 was up 2.5% on January 2, up 5.2% for the month, the best start since 1997. Since 1950, this indicator has only failed seven times, most recently in 2001.
Priced against projected 2013 earnings, the S&P 500 is trading at only 13 times forward earnings. Strong earnings growth and a return to the 2007 peak multiple will carry the market 16% higher in 2013
Real estate prices are recovering, inventories of unsold homes are falling, and both consumers and business are spending more. (source: Jim Hemphill)
Bearish
Each of the new cyclical-bull highs in the SPX since last April was driven by extraordinary and unrepeatable catalysts. The stock markets have only edged to new highs, which weren’t much better in percentage terms, on incredibly bullish and one-off catalysts. This is a sign of a very top-heavy and tired cyclical bull market. How on earth will it continue advancing when hyper-bullish catalysts cease?
Are you aware of any on the immediate horizon? Not me. Sure, earnings can be decent but the lion’s share of Q4 earnings season is almost over. We still have the sequester government spending cuts coming, the epic debt-ceiling fight, and the battle royal over Obama’s record overspending that is rapidly plunging our country into a debt crisis. All these things are bearish catalysts, not bullish ones.
So all of this coupled with the highest complacency of this entire cyclical bull argues overwhelmingly that the coming complacency-sparked sell off will mark the vanguard of a new cyclical bear. But even if it doesn’t, a major correction is in the works. So be very careful buying into the vast majority of stocks these days with the stock markets at such precarious highs. The coming sell off will suck in almost everything. (source: Market Oracle)
As I mentioned in the last post, Trading Where No Trader Has Ever Traded Before, my greatest concern is that you take the necessary steps to safeguard your retirement and 401k accounts. It is possible to protect against the downside while remaining available to the upside. You need a professional to guide you. Call Burt Schlichter at 866-928-3310 for a no obligation conversation regarding your own personal situation. You can also reach him via email at bschlichter@danielstrading.com .
S&P 500 Triple Top - Monthly Chart
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