Early Warning Signs of Market Tops and Bottoms

You cannot call market tops and bottoms precisely. You can identify the conditions that historically precede them, reduce risk as those conditions accumulate, and increase risk as they reverse. That is sufficient for substantial investment advantage.

Why This Matters

Market tops and bottoms are not identified by any single signal. They are identified by the convergence of multiple indicators that collectively describe an environment where the risk/reward of being long (at tops) or short (at bottoms) has become profoundly asymmetric. The discipline is monitoring a composite of indicators and taking action as they accumulate — not waiting for confirmation that comes too late.