Would You Recognize a Stock Market Top?

Many a fortune would be intact if such announcements were audible at market tops

. Alas, there are no such proclamations, so tops come and trends change -- unrecognized by most until it's way too late. The stock market peak in early 2000 was a landmark example: Portfolios were pulverized as countless investors rode the market downward. The October 2007 peak was no less momentous: Several weeks thereafter, prices broke below a quarter-century trendline. You can see it on the chart below: We all know what followed the break of that trendline -- prices went into a free fall. Fast forward to this year. The most recent closing high in the Dow Industrials was 11,205, which printed on April 26, 2010. Thereafter, prices fell to 9686 on July 2, which took out this year's prior low. The questions: Does the recent rally -- including the triple digit Dow gain of July 7 -- signal a new uptrend for the stock market? Or, will the April 26 peak remain the high for the year? Elliott Wave International's July 7, Short Term Update commented on the latest rally: "The stock market's deeply oversold condition became too much for prices near term. The bounce of the past two days will relieve the oversold state and, when it's complete, will lead to the next leg down. . ." How severe will the next "leg down" be? Surely you remember how relentless the market drops became after the 2000 and 2007 tops. Is this latest rally a good time to "get out while the getting is good"?

Would You Recognize a Stock Market Top?

By: ekanem uwemedimoh

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