As the markets continue to move higher amid low volatility, we hear the constant chatter of market tops. Naturally, these predictions rarely come with any date applied, setting up these foolish prognostications to be right "at some point in the future", just like how a broken clock is right twice a day. For investors, these predictions of impending loss and perhaps doom are useless and random, not based in fact or reason
They are attention grabbers in the media, because they are going against the tide -- intent on being different and calling their shot. These guesses are often based on some prior experience. While we like to look at patterns that repeat, the randomness exists while conditions are often different when tops are created.
Market tops (and bottoms for that matter) are a process, not an event. We can certainly point to moments in time that are turning points, but trying to predict these times are futile. The market will give plenty of signs, and it is important to pick these up.
A change in trend for the bulls is far different than buying the dips or even a correction. The market action will change, volume levels will pick up and price action will turn nasty. Dips won't be bought and the indicators will turn decisively negative. While we may be late onto that trend, it's best to wait for confirmation first.
So, we currently have some calls for a correction to come, with some people saying that it would be "healthy". We know markets don't go to the sky forever, and that eventually prices come down -- mostly because when a market becomes irrationally expensive, the "smart money" moves aside. Often this is done before anyone seems to notice or care, but when those dip buyers are absent a new reality takes hold -- my stocks won't go back up, what do I do now?
Yet, as we are in the ninth year of this incredible market rally, we could be in a brief sideways pause with a resumption of the rally. However, so far in 2017 market performance has been stellar -- the S&P 500 up more than 8%, the Nasdaq up double digits. Most indices nailed all-time highs at some point multiple times. How many times over the past years have we heard guesses from the crowd about a market top coming? Several times that I can remember.
For us, the best we can do is follow the lead of market indicators, price action and volume. When they turn, we will turn. We'll usually be late, but that is better than endlessly calling for a market top and losing over and over again before finally getting it right. At that point, how much opportunity have you missed out on? Plenty!