I've identified a few phases that the S&P seems to go through while in a bubble. Maybe you'll see the same signs.
Phase 1 - Topped Out
After a run-up on the market, when the bull run comes to its conclusion, we inevitably start to drift lower. Once it becomes obvious that this retracement isn't going back to All Time Highs any sooner, we begin the "Topped Out" phase. You guessed it- because the market has topped out. This Phase establishes a lower trend line starting before the Topped Out phase.
Phase 2 - Deny
Once the market has spent some considerable time off of its trend line, it will touch down one final time, and then rebound higher. This phase is the "flight test" for the market, and an attempt to hover above the trend line. It pushes a little higher, trying to reestablish a new bull market.
Phase 3 - Wimper
The market fails to sustain its heightened levels in the "Deny" phase. It comes down quite a bit, realizes that its falling, and buys the dip. This sparks one last rally before our next phase. In the grand scheme of things, this final rally is more of a wimper than anything else, and doesn't last long.
Phase 4 - Crash
Suddenly, the market plunges from its new rallied heights. Over the course of a few weeks, we see a ~33% plunge and a bounce from those lows.
Phase 5 - Bleed
The painful fifth phase is a slow bleed for the next several months. Though the market bounced after its crash, it will use its position so slowly drift down to new lows.
For further supporting evidence, check out the related idea regarding the VIX. It breaks down the anatomy of the Volatility Index during this upcoming Crash phase, and might be a useful tool to navigate the rapids ahead.
Let me know what you think!
Phase 1 - Topped Out
After a run-up on the market, when the bull run comes to its conclusion, we inevitably start to drift lower. Once it becomes obvious that this retracement isn't going back to All Time Highs any sooner, we begin the "Topped Out" phase. You guessed it- because the market has topped out. This Phase establishes a lower trend line starting before the Topped Out phase.
Phase 2 - Deny
Once the market has spent some considerable time off of its trend line, it will touch down one final time, and then rebound higher. This phase is the "flight test" for the market, and an attempt to hover above the trend line. It pushes a little higher, trying to reestablish a new bull market.
Phase 3 - Wimper
The market fails to sustain its heightened levels in the "Deny" phase. It comes down quite a bit, realizes that its falling, and buys the dip. This sparks one last rally before our next phase. In the grand scheme of things, this final rally is more of a wimper than anything else, and doesn't last long.
Phase 4 - Crash
Suddenly, the market plunges from its new rallied heights. Over the course of a few weeks, we see a ~33% plunge and a bounce from those lows.
Phase 5 - Bleed
The painful fifth phase is a slow bleed for the next several months. Though the market bounced after its crash, it will use its position so slowly drift down to new lows.
For further supporting evidence, check out the related idea regarding the VIX. It breaks down the anatomy of the Volatility Index during this upcoming Crash phase, and might be a useful tool to navigate the rapids ahead.
Let me know what you think!
