Is it just me or has this most recent all time high been accompanied by more top calling than the previous ones? Maybe it’s just my twitter stream but I feel like we’re entering a new phase of top-calling, where now it’s not just anyone, we’re told it’s ‘professionals’ or ‘respected’ technicians that are saying it, so we’d better pay attention.
I would hope to include myself in that description so I’m a little perplexed by what it is they’re seeing that I’m not.
I realize there are some things they might be concerned about; earnings, growth, margins, Europe, China, the list goes on and on, then there’s technical divergences on everything which means we could be close to a turn.
Well, OK, that could be true. But all of those things are just the ‘set-up’ part of a trade aren’t they? What’s your trigger? Aren’t you missing something? Oh, it’s that inconvenient confirming thing that’s defying you – PRICE.
Here’s what price has been doing for the last six months:-
Wow. Price sure doesn’t seem to care about any of those things everyone else is worried about. I wonder if price even knows. Well actually price does know. Price discounts everything.
And without price confirming your rationale you have nothing. You’re not even predicting, because that implies it’s well-reasoned, you’re just guessing. Calling for a top when price makes an all time high isn’t brave, it’s foolish.
Here’s what you should have said to your clients: Here are all these reasons to be bearish, BUT the market continues to make all time highs, so UNTIL price confirms our bearish thesis, you should stay long.
Instead, you’re guessing that price will confirm soon, so people sell out on your call for a top, then when price makes a new high they’re screwed. You’re still bearish, and now they’re missing out on higher prices. Great job, top caller, it’s OK it’s only other people’s money. You might even get a bonus for the commission you generated.
Think of it this way, if it really is the top, and I mean THE TOP then won’t it be like other major tops where you had weeks, sometimes months to act and successfully avoid the worst? Don’t guess. Wait, and act on evidence.
Take a good long look at the chart above. It’s the S&P 500 since 1953.
Now, tell me with a straight face that with less than a dozen major tops in the last 60 years you’re arrogant enough to think you can call one to the very day.
Are you sure you don’t want to rethink or qualify your call now I’ve put it in context for you? You understand what it is you’re trying to do here. You still think you’re that good?
Now, you may be right, and I will look a fool for having this on my blog forever. You might call it to the day, maybe you can go intraday and call the top tick. See if you can tweet it. You’ll be lauded forever for calling the great top of 2013, hell you could probably even put it as a skill on your LinkedIn profile – ‘Top Calling.’
But let me tell you something, in the long run calling tops and bottoms is a fool’s game. The market just loves to humble in the most brutal fashion, those who think they’ve mastered it. I’m reminded of Nicolas Cage as Stanley Goodspeed in The Rock turning to Mason saying “the second you don’t respect this, it kills you.”