Market Watch: Looking for the Stock Markets Top? No One Will Ring a Bell to Tell You it Has Arrived!

July 10, 2019

Article by Sven Henrich in Wall Street Journal Market Watch

It may be a good time to remind everyone of an old market adage: Nobody will ring a bell when market cycles end. There won’t be a grand announcement that a top is in. There won’t be a massive reversal that will make it clear to everyone that a major top is in, a top for years to come. Wall Street won’t announce it, nor will the Fed, and any warnings will be dismissed.

Nobody can call a top in advance, tops are only clear in hindsight. Not the day after, but often only months later.

In fact tops can be very sneaky, innocuous, uneventful, subtle. Indeed there was nothing special about key market pivot points in 2000 or 2007.

There was nothing drastic about it at the 1,570 level. The next day was an inside day, then an outside day and a couple slightly lower days following that. Nothing there suggested markets would embark on a journey toward 666 by March 2009.

Again: Nobody will ring a bell and nobody can call it, it’ll only be clear in hindsight. Heck even in December of 2007 one could’ve argued new highs would come again. They obviously didn’t, but the action was just chop and a lot of back and forth. Tops are processes. And at every single one of them Wall Street will have higher targets.

Yet 2008 ended with the S&P at 900. It was no different in 2000: While the S&P peaked in March, it had another big rally into the summer to near the all-time highs.

Now we may still grind higher or we may not. After all, we have entered the sell zone twice and both times the stock market then reversed. But be sure Jerome Powell will do his best to keep the fantasy of ever-rising stock prices alive. In 2007 the final high came on the heels of the Fed’s first rate cut — 50 basis points under Ben Bernanke, the same Fed chair who said subprime was contained. Markets peaked two weeks later.

And nobody rang a bell. Not the Fed, not Wall Street. And investors were left holding the bag.

To read this article in Wall Street Journal Market Watch in its entirety and view the related charts, click here.

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