Obvious but Hidden Erosion
Certain indexes hold up better than individual stocks. The Dow for example, topped out in January 2000 and October 2007. On the day the Dow peaked in January 2000, 55% of NYSE-listed stocks were already down more than 20%. The day the Dow peaked in October 2007, 27% of NYSE-listed stocks were already down more than 20%.
On May 1, 2012, when the Dow peaked at 13,339, 30% of NYSE-listed stocks were already down more than 20%. In other words, the market may erode unrecognized in plain sight.
The chart above outlines prior market peaks (dotted red boxes). The topping process is like knocking over a coke machine. You can’t do it in one push, you have to rock it back and forth a few times before it tips. But once it tips, the damage is sudden and obvious.
The ETF Profit Strategy Newsletter provides short, mid and long-term forecasts and actual buy/sell recommendations to guide investors through the topping process and more importantly it identifies the tipping point — the point where the coke machine (stock market) is done rocking and ready to fall.