As they say, the trend is your friend. (Until it's not of course.)
But for now, it is.
After a spectacular finish to 2012. And a blistering start to 2013. There's enough momentum to potentially keep this going for a good deal longer.
However, nothing goes straight up forever. And eventually, there will be a correction. So far, each small pullback has been a buying opportunity. But one of these days it will not be.
But how will you know the difference?
Everybody has their favorite indicator(s) they like to look at for spotting a top. Or at least for a meaningful correction.
So what are your favorite indicators?
Are they any of the more popular ones described below? Or do you look at something else? Take the informal survey below and let's see what everybody is looking out for.
1) Drop below moving average (50-day, 200-day, etc.)
2) Classic chart pattern analysis (like a bearish Head and Shoulders pattern which called the top in 2007)
3) Volume drying up on up days/weeks, with volume increasing on down days/weeks (increasing volume on a down day is typically considered a distribution day, and an increasing number of distribution days can signal a top)
4) Falling consumer confidence (with 70% of the US economy tied to consumer spending, a decline in consumer confidence can be a warning sign of a slowdown to come)
5) falling earnings estimates (as earnings go, so should the market)
As I was typing this list, I realized there were plenty more 'indicators' to list. But above are just a few.
What are you looking at? Share your thoughts.
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