5 Signs the Stock Market Has Reached a Tipping Point

An old investment saw goes like this: "Market tops are processes, bottoms are events." This means that in the stock market, it takes time for all the moving parts to top out and head lower.

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An old investment saw goes like this: "Market tops are processes, bottoms are events." This means that in the stock market, it takes time for all the moving parts to top out and head lower. It's usually a gradual affair, unlike major bottom that are often marked with panic selling and sharp moves.

The market can easily shrug off events that could hurt it, such as a wide miss on economic growth or unusually weak housing statistics. However, when major issues start to accumulate, before we realize it, we've hit a tipping point where there are too many changes for the bull market to handle.

Let's be clear: We are not trying to pick a top or master market timing. But investors should take action when it becomes clear things have changed for the worse. And the sooner we recognize that change, the better.

Here are five signs investors should look for to gauge the likelihood of a stock market top. They're not set in set in stone – what was effective at one peak might not be effective for the next. However, evaluating these major areas still can provide clues as to the market's health and intentions.

Michael Kahn
Contributing Writer, Kiplinger.com
Michael Kahn, CMT (Chartered Market Technician) has been writing about the markets since 1986. He is the author of three books on technical analysis published in five languages. His specialty: jargon-free analysis accessible to everyone. He has contributed to many leading financial media including Barron's Online, MarketWatch and Nightly Business Report and was the Chief Technical Analyst for BridgeNews.