When you really dive in and see what’s going on, it becomes quite obvious that this will end in disaster for many investors.
Do you know why?
Because that’s what always happens.
Why is that our problem?
What does that have to do with investing and helping my family?
If you take maybe just 30 seconds to study history, you’ll find that most uptrends were not bubbles. They were just uptrends.
There were things that happened this month and even last year that have never happened in the market before. There were even some events that only occurred a few times in history.
Every month and every year we see the market do things that it’s never done before, or maybe has done very rarely.
If you really want to get into it, we see something happen every single day that rarely happens, if at all.
We can make a big to-do about it, if that’s your modus operandi. Remember it’s a lot of people’s job to sensationalize everything. Way more people than you think. And in many cases, the ones with the loudest mics.
But that’s not our job. In fact, as investors, our job is the exact opposite.
It’s up to us to recognize what is just perfectly normal market behavior. Or “abnormal” behavior, if you will, because that’s actually what normal means in the market.
If you think the market is crazy, perhaps consider the fact that it may be you who is crazy.
Here’s something that hasn’t happened in a long long time….
Financials just broke out to new all-time highs. It took nearly 14 years to finally absorb all of that supply:
And let’s remember, the actual top in Financials in 2007 was right around this time of the year. Bear Stearns and Lehman Brothers peaked in January & February, respectively that year:
This is the perfect time to bring up the fact that there is wisdom in Relative Strength.
The internals of the Financial Sector peaked WELL before the sector index itself, and certainly before the S&P500 finally peaked in October. By that point, most things had already been falling apart for while.
We saw similar deterioration before the peak last year. See: Happy Anniversary Of The Top
And sure, that time was different
But it’s always different.
That’s the point.
The deterioration taking place before indexes ultimately peak is what remains constant.
We call that Market Breadth.
FYI – last week we saw the most new highs ever. So no, we’re not seeing deterioration. Only the opposite of that.