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If you thought the market crash of 2008 was a doozy, you haven’t seen anything yet. While we’ve been on an incredible run, with the S&P 500 at record highs, this is – as the experts say – “the excitement before the storm.” Check out the following 10 reasons and see if they resonate with your common sense and critical thinking on whether or not it’s a great time to get the hell out of the market ASAP!
While indices continue to climb higher, you’ll want to pay attention to the number of 52-week highs – they’re starting to decline. Looking at the S&P 500 from the end of October, you’ll notice that more than 400 companies are down at least 10%, half are 20% lower, and 100 of those companies have dropped more than 30%! That’s a huge red flag.
If you’re familiar with what a “swing low” is, you’ll notice that asset prices are at a low that’s lower than at any point before. And over lengthy periods of time, successively lower lows are a clear sign that underlying asset prices are experiencing a downtrend. A very ominous sign indeed.
We are currently in a period of time unlike any other. Never before have we seen both such high trading volume, and, high volatility. What’s more scary is that by looking at the charts, the highs and lows appear to be going sideways, which means they’re the norm. So you can imagine when (comparatively speaking) a real low hits.
Even your most novice of investors should notice that valuations are off the charts. P/E ratios, book values, dividend yields, and price-to-earnings are at historical extremes. The numbers no longer justify, and the value is far from being rooted in anything tangible.
The market is full of bad breadth. No, not the kind that comes out of a day trader’s mouth, but the kind that refers to market stocks that are experiencing fewer and fewer peaks. Too many stocks on the S&P 500 are not participating in an upswing, which usually means the market as a whole is coming towards its final climax.
Another thing to look at is how stingy the Federal Reserve is being. We are in a period where the Fed is increasing interest rates and squeezing credit – all of which will make it harder for everyone to get access to money. One of the biggest side effects of this will be the number of people that’ll loose their homes because they can no longer pay the interest on their mortgages. And where the housing market goes, the market follows.
Notice those distribution days? You know, those days when the market is down on a heavier than usual volume. Well when the market has more than half-dozen distribution days within a one month period – as it’s been having the past few months – this is a red flag worth noting.
Market rallies are usually led by a small number of very strong stocks considered “market leaders”. When these stocks begin to falter – as they have been – then much like in the army, where the leader goes the troops will follow.
Group think is one of the most dangerous things you can fall into when it comes to investing. And if you remember back in 1987, 2000, or 2008 – right before the crash – there was a lot of bullish thinking among analysts and advisers like there is now. Don’t get burned by following the heard.
Donald Trump. Yes, taking things outside of the market and the numbers, we’ve got perhaps the most – and how do I put it – insane election ever. If Donald Trump gets elected, we could see a collapse of not just the market, but society and our way of life as we know it.