Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Stock Market Lemmings Are Heading Towards The Cliff… Again

Stock-Markets / Stock Market 2017 Nov 24, 2017 - 06:53 PM GMT

By: Gary_Savage

Stock-Markets

Did we learn nothing from the tech bubble?

The real estate bubble?

The energy bubble?

Apparently not, as here we go again. The next series of bubbles is now in progress (Bitcoin is the first).

Let me go over again the signs of a bubble. Price will usually rally at least 100% or more in a year or less. A clear sign of out of control human emotions.


Price will stretch 40, 50, or even 100%+ above the long term mean (200 day moving average).

Investors will start to rationalize reasons for why this rise in price is justified. In 2000 investors convinced themselves that earnings didn’t matter. All that mattered was how many eyeballs your website was attracting.

In 2006 investors convinced themselves that we were running out of available land in the world and skyrocketing real estate prices were justified. Apparently none of these people had bothered to take a look at the Mohave Desert. Land as far as the eye can see.

In 2008 investors convinced themselves that we had reached peak oil, even though we had tankers sitting in the Gulf of Mexico unable to unload their oil because all of the storage facilities were full.

Investors have now convinced themselves that the ability to counterfeit their own currency really is a viable strategy to get rich.

And finally towards the end of a bubble you will get a massive insurgence of copycats trying to piggyback on the mania. During the final few months in 2000 there were literally thousands of websites coming online, none of which ever had even the remotest chance of making a dime. Here is a list of current Crypto currencies as more and more people try to piggyback on the mania. Again, classic behavior as a bubble nears its top.

There is no barrier to entry in the cryptocurrency market and there is no fundamental difference between Bitcoin at $8,000 and bytecoin at less than a penny. It’s not like one has a superior business model and produces a more desirable product. In fact the inevitable massive dilution of the cryptocurrency market virtually guarantees that price will eventually go to zero.

I’ve said this before, and I’ll say it again: Human nature never changes.

At the very beginning of a bubble almost no one believes. The very few with the foresight to see what is coming are laughed at and branded as extremists. For almost a year now I’ve been telling investors that once the NASDAQ composite broke out above the 2000 highs we would see an aggressive rally and 10,000 would be a piece of cake, 20,000 wouldn’t be completely out of the question once we get into the nutty phase of the bubble. Most everyone laughed at me then, and many continue to laugh at me now even though the NASDAQ is doing exactly what I said it would do, it’s already almost halfway to 10,000 from the breakout above 5000.

Four years ago I could’ve made that same statement about bitcoin. When bitcoin was under $1000 I could’ve predicted that we would see price go above $8000. I guarantee at the time everyone would’ve laughed at me, and thought I was insane. Now however, as price has continue to rise sentiment has swung 180° in the other direction, and no one can see any possible scenario where price could collapse. But I guarantee you price will collapse. Every parabolic move in history ends this way. This time is not going to be different.

Let’s face it, anyone with a shred of common sense left can see that crypto currencies are a Ponzi scheme. Getting rich simply isn’t as easy as creating your own currency out of thin air and then watching as gullible investors bid the price up. That is a perfect example of the Greater Fool theory in action.

The sad fact is most of the fools jump into a bubble towards the very end and then get caught when the market collapses.

You need to ask yourself:

Did you get caught in the tech bubble?

Did you get caught in the real estate bubble?

Did you get caught in the energy bubble?

If you answered yes to these three questions, and you are now buying bitcoin after it’s already rallied 700% in the last year, then you my friend are the Greater Fool. You are unable to learn from past mistakes. You are one of the sheep that drive bubbles. You buy too late, and you hold too long.

The time to get into a market is before the parabolic phase begins, not after it’s already rallied 700%. I don’t believe bitcoin is going to be the only bubble. We are going to have a bubble in the stock market, and I expect we will probably have a bubble in the gold market after that.

Many, many Greater Fools are now piling into the bitcoin market.

Those very few that can still think logically recognize that it’s too late to jump into the bitcoin bubble. Those with foresight can see the next bubble is just now beginning in the stock market. If you want to ride a bubble you need to get in early. I’ve posted the Robo ratio a couple of times in past articles. It is one of the best, if not the best single sentiment tool to judge complacency in retail investors. The Robo ratio still isn’t even vaguely close to conditions that exist at final bull market tops, much less at a bubble top.

Source: sentimentrader.com

Folks if you want to profit from a bubble, you have to get in early when everyone else is still in denial. Despite doing exactly what I predicted it was going to do, most traders still view every pullback In the stock market as the beginning of a crash, instead of a buying opportunity. At some point price will go up far enough that traders will lose all fear and every pullback will be viewed as a buying opportunity just like they view pullbacks in bitcoin right now. When we get to that point it will be close to the top and time to start thinking about selling your stock market positions.

If you got caught in the tech bubble, real estate bubble, or energy bubble maybe it’s time to exit the Greater Fool bandwagon and do something different this time. Maybe it’s time to buy at the beginning of a bubble instead of the end.

I warned people that once the summer/fall correction was complete the markets would begin a vertical phase and traders would make a lot of money quickly. Most ignored me and missed the opportunity, while they waited in vain for the September/October crash that I knew was never going to come this year.

This is just the very beginning of the bubble. You can either continue to wait and buy at the top just like you did during the tech bubble, real estate bubble, and energy bubble, or you can try something different and buy at the beginning of the bubble this time.

I think we are likely to get some kind of correction in January, or February. This time instead of viewing it as the beginning of a crash, use it for what it is…

Possibly the last great buying opportunity before the bubble shifts into a higher gear.

Like our new Facebook page to stay current on all things Smart Money Tracker

Gary Savage
The Smart Money Tracker

Gary Savage authors the Smart Money Tracker and daily financial newsletter tracking the stock & commodity markets with special emphasis on the precious metals market.

© 2017 Copyright Gary Savage - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules