Monday, November 18, 2013

How do we identify a bubble?

 Early in a cyclic bull market the moves are large and long (relatively speaking).  As the market advances usually the moves become smaller and shorter. By the time we reach bubble territory the cycles have become frequent and shallow. So we know what to look for to know when the markets are becoming over valued.

Here is the current situation:


GL traders

4 comments:

  1. That's really a great model - I've jokingly called it the "Master Algo" - more on that it John Hussman with the basic formula at http://www.hussman.net/wmc/wmc131111.htm

    He also published this chart again with commonality criteria in the text- http://www.hussman.net/wmc/wmc131111a.png

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  2. Yeah, tried to capture the essence of Hussman's articles in less words.

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  3. "Major Highs are always spike events that mark the exhaustive extreme." Martin Armstrong

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