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WHAT YOU DON’T SEE AT MARKET BOTTOMS: RETAIL STAMPEDE EDITION

It is said that while bottoms are events, tops are processes. Translated, markets bottom out when panic sets in; therefore, they can be more easily identifiable. By contrast, market tops form when a series of conditions converge, but not necessarily all at the same time.

We have stated that while we don’t believe the stock market has made its final cyclical top, we are in the late stages of a bull market (see Five Steps, Where`s the Stumble?). Nevertheless, psychology is becoming a little frothy, which represents the pre-condition for a major top.

As a result, we are publishing another report in a series of the “things you don’t see at market bottoms”, where we are seeing widespread signs of investor euphoria.

Interested readers can review the reports in the other editions in this series:

What You Don’t See At Market Bottoms
What You Don’t See At Market Bottoms: Euphoria and Wild Claims
What You Don`t See At Market Bottoms: No Fear Edition
What You Don’t See At Market Bottoms: Paris Hilton Edition
What You Don’t See At Market Bottoms: CFD Trading Edition
What You Don’t See At Market Bottoms: Halloween Edition
What You Don’t See At Market Bottoms: Rational Exuberance Edition
We reiterate our belief that this is not the top of the equity market and investors should be aware of the risks of an environment in which sentiment has become increasingly frothy. Jeremy Grantham of GMO recently penned an essay calling for a market melt-up. Investors should also remember Bob Farrell’s Rule #4: “When markets go parabolic, they rise further than you think, but they don’t correct by going sideways.”