Financial media pundits are at it again. They are the ones who have been saying, “This is the market top, get ready for the downside!” Ignore them. Calls for a bearish turn in the markets over the last few years have rarely worked out. I don’t know why the talking heads get so giddy in trying to call a top. As hard as it is to make money in a bullish stock market, it’s even tougher to make money when the markets are falling.
A market top is a process, not an event
I’ve said it hundreds of times: Calling a market top or bottom is a loser’s game. The truth is, market tops are process and not an event. When someone says a top is coming tomorrow … or next week … with supporting evidence, I simply laugh and turn away.
The market is always making a top. Just look at any chart and you’ll see a progression of higher highs and higher lows working their way from bottom left to the upper right. It’s the last top that is most meaningful, and it’s very difficult to predict that moment. Instead, we let the market tell us what the message is rather than telling it what to do. When you’re picking a top, you are trying to command the market. Good luck with that.
But the financial media doesn’t let that stop them! Prominent technicians have been sounding the alarm bells recently. Of course, their bells have been ringing for months, but they continue to claim that they have inside information or insist a technical tool is flashing a rare sell signal. If a new market trend is coming, certain indicators will tell you.
There are chinks in the armor. Breadth has been poor, the Russell 2K has been weak and the put/call ratio has increased. However, the biggest and most important indicator of them all – price action – has not signaled the end of the world just yet.
Remember: the market won’t lie to you. It doesn’t care what positions you are carrying. Pay attention to the market and not the pundits trying to call a top, and you’ll find yourself on the right side of the market far more often than not.
