How To Play The Biggest Bubble "Inside" The Stock Market Since The Collapse In 2000

The stock market is currently in an extremely bullish mode fueled by a "bubble" inside the market that's unsustainable and unpredictably bullish.

Like any bubble…

The heights to which it will push stock prices are unpredictable.

However, unlike most bubbles…

It may be predictable.

This is the third time that this specific type of bubble has developed since 2000. In each of the last two occurrences, there has been an identifiable tipping point at which this bubble has "popped."

And like most bubbles…

When they pop, the market drops significantly.

I'm sure this type of bubble has developed and popped many more times than the two shown below. Unfortunately, the data is only available back to 1997.

However, I think you'll agree that the logic behind how a tipping point or "early warning" and "confirmation" are determined would have worked just as well in prior market tops.

As you'll see in the charts below, there is a and "early warning" that the bubble has popped and then a "confirmation" that the market top should be in place.

The first time in our dataset that this bubble developed and popped was in 2000. When the initial early warning occurred at the end of May 2000, the SPY was trading $142.

After the warning, the market rallied back to new highs but failed to continue. Then at the end of October, the confirmation occurred. Ironically this happened at the same price as the warning from 5 months earlier, $142.

After the confirmation, the SPY lost 46% of its value!

In 2007 the market's pattern was very similar. The "early warning" occurred at the end of October at $147 followed by a confirmation 4 months later at about the same price.

After the confirmation, the market lost as much as 54% over the following 14 months.

As you can see, this has been very timely and given you plenty of time to adjust from a bullish to bearish mindset.

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Disclaimer: The information provided by us is for educational and informational purposes. This information is based on our trading experience and beliefs. The information on this website is not ...

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