This page has been archived and commenting is disabled.

How To Recognize Them: A Visual History Of The Most Popular Market Tops And Bottoms

Tyler Durden's picture




 

In the aftermath of the volatility from the past week, there is one question on everyone's lips: is this the bottom and, corresponsidnly, was the BABA IPO the top? Because if nothing else, all the churning action from the past week has only provided a great opportunity for banks to pad their flow business revenues since collapsing trading volumes over the past few years have finally reversed and in fact, exploded higher, if only for the time being.

Still, few are the market makers that make money no matter what the market does (especially since HFT firms, long since exposed for merely frontrunning big order blocks instead of providing liquidity, are now disappearing at an accelerating pace), and there are those who, rigged casino analogies notwithstanding, still want to place their money in the market betting on either more upside or downside. For their benefit a few days ago we posted "The "Crazy Ivan" Playbook: How To Time A Near-Term Market Bottom" however, we realize that most people are visual learners, so for them, here is the Investor Business Daily's compendium of the most notable market tops and bottoms in recent market history.

First, the market bottoms:

Market bottoms are deciphered by your observing the daily price and volume action on the four major indices: the S&P 500, Nasdaq Composite, New York Stock Exchange (NYSE) Composite and Dow Jones Industrials. After the market makes a low, look for the first day the market closes up from the previous day. This is normally day one of a rally attempt. As long as the index is able to remain above the previous low, the attempted rally is in place.

The next step is to wait and watch for one or more of the four market indices to show a “follow-through day.” This is a day where the index closes up significantly on volume heavier than the previous day. The S&P 500 or NYSE Composite typically need to close up 1.7% or either the Nasdaq Composite or Dow Industrials need to close up 2.2% or more. The first three days of an attempted rally are too soon to judge if the market confirms its new uptrend by having a follow-through day. Follow-through days can happen on the fourth day or later of the rally attempt.

It is important to note that not all follow-through days lead to sustained new market uptrends. About 20-30% of the time they may fail fairly quickly. However, no bull market has ever started without a follow-through day…and it will occur when most people are unsure and afraid because the news during the decline was so negative that people become doubtful and hesitate to act on the confirmed new uptrend.

1974

 

1990

 

1998

 

1999

 

2003

 

2007

 

And the the market tops:

After a sustained market uptrend, there will always be signs when the advancing phase is over. These signs will come as the market is still advancing. The key signal the market may be in a topping process is an increase in the number of distribution days in at least one major market index. A typical distribution day is one that closes down from the previous day (at least -0.2%) on higher volume than the prior day. This is your first clue institutional investors are selling stocks.

Up to five distribution days over a period of four or five weeks usually signals that the market is beginning to top. In addition to days down, you should also look for stalling days. When you suspect a stalling day, be sure to observe the price action for the previous day. The day before a stalling day will show a significant price increase when compared to its previous day. The stalling day will show only a tiny amount of price progress compared to its previous day and volume either increases or remains heavy. This I call heavy volume without further price progress up.

Another thing to watch is the action of the leaders. As the market is topping many of your market leaders may also show topping signs themselves. In addition, you may find you need to sell a stock because it drops 7-8% below your purchase price. Pay attention when the market starts forcing you out; it can help you protect your capital.

1929

 

1987

 

1990

 

2000

 

2007

 

And now that you read and saw all of that... forget everything and remember: in this rigged, manipulated "market" the only thing that matters is what the central banks do, which in turn only matters until the central banks finally destroy what little credibility they have left.

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 10/17/2014 - 14:25 | 5347981 KidHorn
KidHorn's picture

What a useless post.

Fri, 10/17/2014 - 14:28 | 5348005 Bell's 2 hearted
Bell's 2 hearted's picture

think of it as a respite from the ebola post deluge

Fri, 10/17/2014 - 14:42 | 5348101 Pinto Currency
Pinto Currency's picture

 

 

Historical charts.

Don't seem to be applicable with the Fed juicing the market separating it from what is happening with revenues and earnings.

Juice - markets up.

No juice - markets down.

 

Fri, 10/17/2014 - 15:10 | 5348220 frankTHE COIN
frankTHE COIN's picture

Quick Question.
Are there any examples of Countries Intervening to Prop up their Currency and , In the End, Failed to do so ?
The Ruble in the 1998 Asian Contagion, and on a smaller note, The Bank of England losing the Battle of the Pound , and having to leave the ERM. In 1992.
I'm just asking.

Fri, 10/17/2014 - 16:09 | 5348532 zhandax
zhandax's picture

As they say, "History is littered..." Seems like one of the Roman Emperors tried to raise the silver weight of the Denarius.  IIRC, the army killed him.

Fri, 10/17/2014 - 14:34 | 5348051 frankTHE COIN
frankTHE COIN's picture

I disagree. It's a Spectacular Post. A little Technical Analysis can go a Long Way.

Fri, 10/17/2014 - 19:04 | 5349024 SAT 800
SAT 800's picture

Yes; that's true. but I don't suppose everyone is going to become a trader overnight; but it is true, that charts certainly contain useful information that you can trade on.

Fri, 10/17/2014 - 14:57 | 5348099 Dr. Engali
Dr. Engali's picture

I disagree. The IBD is one of the best market papers out there. IMHO.

Fri, 10/17/2014 - 15:03 | 5348203 PrecipiceWatching
PrecipiceWatching's picture

True, back when we actually had this thing called a "market".

 

All any financial publication can do now is report on the insanity.

 

Fundamental analyis?  Stock picking?  Relics.

Fri, 10/17/2014 - 16:43 | 5348667 SkySavage
SkySavage's picture

Read it every day, and have been a subscriber for years. 

Remember, whether it is people or algos buying and selling, the market goes up when shares are bought and down when shares are sold.  The footprints of buyers and sellers are always there if you look closely enough. 

Fri, 10/17/2014 - 22:06 | 5349492 daveO
daveO's picture

I agree. I've subscribed since the 80's, but no more. I'll consider them again when interest rates 'normalize', but probably not in this lifetime.

Fri, 10/17/2014 - 18:44 | 5348974 SAT 800
SAT 800's picture

That's not true it's very useful. be careful not to take in the intellectually lazy internet blog meme that "nothing matters anymore because of the Fed. intervention, and etc.". This is false. As false as global warming. as false as thinking the Earth is flat. These are good charts that show human behavior in the prices; and charts still do the same thing today, as they did in 1929; or 1987; record human behavior. A market that doesn't make any new high is not a bull market; it;s a bear market; over what time period ? That depends on what market it is. With regard to shorting the stock market, which will be treated as a bear market until it proves it is otherwise, we'll be looking for tops that fail below receent highs; so called declining doiuble tops; this is very basic stuff. what kind of chart do you need? a daily bar chart with volume printed on the bottom; no candles, no waves, head and shoulders is a shampoo; not a market timing signal. just basically, if people quit buying at a maximum price, a top, lower than the previous top; after a a couple of days, you can try a short; you can put in price orders; that are only filled if your price comes up during the day; so you can get in if you're asleep or at work. This is relatively safe on the short side, because it's always the escaalator up and the elevator down. it's hard to get people to keep buying at "relatively" high prices when theyive just been "shocked and awed". The higher the price you can sell at, the better; don't be influenced by news items or talking heads. Sometime next week it might be time to go short again; or not. that's a pretty short time since the last time I knew I should short the S&P; maybe the week after; if it continues to be just crazy, up and down every day, I would keep waiting. Today was a nice sensible day. We;ll collect more information next week. Meanwhile the GBP and Feeder Cattle need to be shorted; FC for April '15 delivery. you always have to do money management you can't put your whole account on any one thing; you should be able to afford a couple of days of contrary action when you go in; but you certainly need to take your lloss if your timing is wrong. Did you see what my big mistake was; last time? I didn't wait long enough; the market went down a lot more. Because I don't have a crystal ball and I know the odds get worse that t he thing'll turn against me and rally, as it dropped very, very, dramatically; I didn't want to play anymore. That's okay in this case; in the case of the GBP or the FC you just want to wait for many months; with a zero loss stop order. Don't have any "goal"'; let the market surprise you with your good fortune; but it will take time to develop.

Fri, 10/17/2014 - 18:52 | 5348991 SAT 800
SAT 800's picture

Next time, if I succeed in getting in short; I'll just wait it out with a zero loss stop order. because next time the psychology will be even worse; and it will be difficult to get rally going in any significant way; The bottom, as they say; is a long ways down; that's why I'm willing to wait for a year and half for a chance to go short; it's much safer and sooner or later, you can make all the profit the stock market people made by being in the market for the last two years, in a month; and be done with it.

Fri, 10/17/2014 - 14:25 | 5347984 Bell's 2 hearted
Bell's 2 hearted's picture
 A Visual History Of The Most Popular Market Tops And Bottoms

 

You provide charts

 

I want Centerfolds

Fri, 10/17/2014 - 14:24 | 5347987 i_call_you_my_base
i_call_you_my_base's picture

"Here are some charts.

Conclusion: They don't matter."

Fri, 10/17/2014 - 14:25 | 5347988 nope-1004
nope-1004's picture

Do charts even matter anymore?  THey don't hide their ongoing TNX manipulation, as well as the obivious PM's and mining shares.  Not sure the traditional "top" can be applied to this fake HFT / USD computer game we're all witnessing in real time.

 

 

Fri, 10/17/2014 - 14:39 | 5348077 Dr. Engali
Dr. Engali's picture

I'm fairly certain Tyler said just that in the final paragraph.

Fri, 10/17/2014 - 19:00 | 5349015 SAT 800
SAT 800's picture

He implied that; but he's not a trader. it's a popular opinion.

Sat, 10/18/2014 - 00:17 | 5349744 zhandax
zhandax's picture

A price chart is simply a graphical representation of mass psychology.  As such, when a multiplexed layer of sociopaths attempt to influence prices for a lurid assortment of personal or group gains, don't be surprised if the charts are not as simple to decipher as described by a 20 or more year old text.   As Sat points out, the more complex the chart,, the more basic the principles needed to analyze it.

Fri, 10/17/2014 - 18:58 | 5349009 SAT 800
SAT 800's picture

simple study of simple patterns in daily bar type price charts definitely works; the same as it did in the past. The MEME about the "fake" market, etc, etc. is internet wisdom; in other words it's not true. The market is no more or less "fake" than it was in 1929; for instance; in fact, it's clear that it's less fake; and yet J.P. Morgan and other people knew it was time to go short; because of the price behavior; and because of other things; but if you study the charts in this article you'll see the double tops and declining double tops; usually; also the fall out of the "up channel" which is not any "moving average"; you just draw it with a ruler on the chart ! Or just  look at it; a line connecting the tops and another line connecting the bottoms. The Stock Market is not very easy; if you're just starting out you might want to look at some futures charts; there's lots of different markets.

Fri, 10/17/2014 - 14:25 | 5347994 Enceladus
Enceladus's picture

1 2 3 4 5

Fri, 10/17/2014 - 14:27 | 5348004 Barnaby
Barnaby's picture

You don't want to pour your cash into anything Tom Clancy named due to being cigarette-stupored and drunk, and misunderstanding the Bridge-French a random Russian ensign was saying. Crazy Ivan = Lewis Carroll rabbit hole.

Bottom = bottom for you. Your comfort zone. Cash is essential now, friends.

Fri, 10/17/2014 - 14:28 | 5348007 Tall Tom
Tall Tom's picture

And now that you read and saw all of that... forget everything and remember: in this rigged, manipulated "market" the only thing that matters is what the central banks do, which in turn only matters until the central banks finally destroy what little credibility they have left.

 

 

Okay Tyler...I think I understand it now.

Fri, 10/17/2014 - 14:33 | 5348041 Kirk2NCC1701
Kirk2NCC1701's picture

"It's a SMALL Club.  And You ain't in it!"

Q:  How do we get IN?  /sarc

Fri, 10/17/2014 - 14:44 | 5348106 Dr. Engali
Dr. Engali's picture

That depends. What Tribe do you come from?

Fri, 10/17/2014 - 19:05 | 5349027 LooseLee
LooseLee's picture

"How do we get IN?"

Sell your SOUL to Satan, Kiss a lot of Butt, Have no integrity or moral CHARACTER, act only for your own well-being, et. al..Basically become a card-carrying member of the PINKO COMMIE FASCIST Club---aka DEMOCRATS & REBUPLICANS and their enablers..

Fri, 10/17/2014 - 14:35 | 5348053 netpounder
netpounder's picture

Only Fed activity charts matter.  Throw away the technical analysis charts and books.

Fri, 10/17/2014 - 14:42 | 5348093 Bell's 2 hearted
Bell's 2 hearted's picture

sort of agree ... but i think it works only as long as we're growing (no matter how tepid)

 

I think we're at onset of another recession (a typical too much inventory led one) which likely will morph into another financial crisis. 

 

If i'm right ... and it happened with Federal Reserve all guns blazing past 6 years ... Mr Market won't be happy

Fri, 10/17/2014 - 14:58 | 5348113 ebworthen
ebworthen's picture

Bullard bullshit swings the markets green on a Friday; and bullshit from a non-voting member.

Corporate debt, margin debt, stock buybacks, investor bullishness, and complacency at all time highs.

FED has painted themselves into a corner; they either do QE4 or announce no rate hikes until 2017 or both.

Blow the bubble bigger, suck some air out, or let it pop; all dependent upon the FED.

C'mon Janet, prime rate at 4% and a definitive "no more QE in my lifetime".

That, or admit you have no idea what to do with the bubble you've blown.

And send me my check for $3 Million tax free already.

Fri, 10/17/2014 - 14:47 | 5348116 PrecipiceWatching
PrecipiceWatching's picture

I'm not on board with the idea that this is just another market top, similar to all others throughout history.

 

Among other things, we don't have any semblance of a "market", an economy, or anything remotely resembling national fiscal sanity.

 

Completely uncharted territory of madness and venal criminality.

Fri, 10/17/2014 - 19:07 | 5349034 SAT 800
SAT 800's picture

It's true that our situation is unique; growth, for instance, is over; the economy is not recovering; nevertheless it is another market top; similar to others in the past; because after a top markets go down !

Fri, 10/17/2014 - 14:47 | 5348122 Keltner Channel Surf
Keltner Channel Surf's picture

Will a color version of this be available as a coffee table book for the holidays?  

Fri, 10/17/2014 - 14:50 | 5348134 Spungo
Spungo's picture

Charts still matter a little. You can see that some of the crashes had very strong recoveries almost immediately, and then they crashed again. That 1974 chart shows it went from a low of 570 back up to 690 (21% gain) in a few days or so. The lesson here is that we shouldn't be surprised at all if we get a really strong rebound next week. That's completely normal. I wouldn't bet money on it happening, but don't be shocked if it happens.

Fri, 10/17/2014 - 14:58 | 5348186 madcows
madcows's picture

So, you can have a market "Bottom" ever just a few days?  That's really just a minor move, isn't it?

I'm saying we're in a MAJOR market topping event.  All the up and down volatility is based on the latest Bulltard comments or GoPro disappointment.  Such low volume means even the slightest news move markets.

regardless, we're all gonna die from ebola.  thank you, your royal traitor in chief.

Fri, 10/17/2014 - 15:07 | 5348234 AlchemyFinancial
AlchemyFinancial's picture

How to recognize a market top... When the banks are unloading as fast as they can, you probably have hit the top.  And thats exactly where were at now.  My analysis http://www.alchemyfinancials.blogspot.com/2014/10/casual-friday.html

Fri, 10/17/2014 - 15:21 | 5348312 A82EBA
A82EBA's picture

80% still dont know what a central bank is. Credibility with who?

Fri, 10/17/2014 - 15:22 | 5348321 madcows
madcows's picture

it's the bank in the middle of town, der.

Fri, 10/17/2014 - 15:24 | 5348332 Ewtman
Ewtman's picture

While interesting, without context these charts don't really explain much. Put into Elliott Wave context, however, the message the author is trying to convey makes much more sense...

 

http://www.globaldeflationnews.com/introduction-to-the-elliott-wave-prin...

 

http://www.globaldeflationnews.com/dow-jones-industrial-average-baseline...

 

Fri, 10/17/2014 - 19:10 | 5349039 SAT 800
SAT 800's picture

No. no Elliot Waves. Been studied by math. professors; no correllation. it's all imaginary. like a ouiji board.

Fri, 10/17/2014 - 15:33 | 5348377 steveharless
steveharless's picture

chart rhymes with FART - and usually the same results....smelly and useless

Fri, 10/17/2014 - 16:10 | 5348528 alexcojones
alexcojones's picture

Let me put on my "They Live" Sunglasses.

Then I can recognize Them.

Roddy Piper's Alien Glasses - They Live
Fri, 10/17/2014 - 16:12 | 5348543 alexcojones
alexcojones's picture

But then I like the "Bubblegum & Bankers" scene better.

I'm here to chew bubblegum...
Fri, 10/17/2014 - 17:02 | 5348728 SkySavage
SkySavage's picture

If you look at a weekly chart of the SPX, you can see clearly a large volume spike during the 2007 top, exactly like your seeing now.  There were several other spikes along the way, like mid 2010 and mid 2011, but each of those tops were prevented with QE.  The signs were there each time, but intervention kept the market afloat artificially. 

With the Fed out of ammo, the QE baton needs to be passed. 

Fri, 10/17/2014 - 18:10 | 5348896 sof_hannibal
sof_hannibal's picture

the question is-- who pays for QE. we know the answer to that. the government, borrowed against future taxes to which losers/ suffers are avg. ameicans (income tax vs. capital gains/ loses)... it's a good time for rich people. thank god... I see no reason why we can't keep screwing over the little guy into QE infinity? what is the worse that could happen?

Fri, 10/17/2014 - 17:59 | 5348863 sof_hannibal
sof_hannibal's picture

QE won't stop; they can't and won't stop it. The question is, when does QE stop working? It seems to be at it limits from a technical perspective; but, from a psychological one-- I say buy... the dip... hahaha...

Sat, 10/18/2014 - 05:46 | 5349920 AdvancingTime
AdvancingTime's picture

Many people work hard for their money and even harder to save a bit of it but are lulled into complacency when it comes to protecting it. One of the saddest thing to witness is someone who has worked so hard losing all their money when an investment turns south. After years in the markets I find charts often are better at telling where we have come from than where we are going.

This reminds me of the story about how many people describe going bankrupt, slowly at first then quickly at the end. This market has far exceeded the upside expectations of many bulls while the economy has languished and in many respects failed to regain all the ground lost since 2007. The question I put forth is, are we reaching the turning point? More on this subject in the article below.

http://brucewilds.blogspot.com/2014/09/the-turning-point-may-be-soon-upon-us.html

Do NOT follow this link or you will be banned from the site!