This is an outstanding article about how to discern a final stock market top before a bear decline. Figuring out a top PE is somewhat elusive, but the book value of stocks and the breadth of the stock market are very good indicators. As the author mentioned, we are not near a market top yet when it comes to book value and breadth of stocks above the 200 day moving average.
However, a market correction can happen at any time. We are now down two days in a row on rumors of lower Christmas sales and Federal Reserve QE tapering. We still have further to fall in this correction. Take a look at the chart below from StockCharts.com for the S&P 500 versus aggregate bonds (AGG). Click on the chart to expand it. Notice that the MACD signal line gave a reversal clue that we were at an intermediate stock market top, and we were headed for a decline whose extent is not yet known.
No comments:
Post a Comment