From Marketwatch.com
7th March 2014
"Sitting on the sidelines and waiting for the bull market to top out takes tremendous discipline. Trying to capture that final 5% can be costly if you get the timing wrong (and most people do). Be prepared for increased volatility as we get closer to the end.
Of course, it’s not easy to sit on the sidelines when everyone else seems to be making money. Although many investors are dreaming of another 30% return this year, the odds are good that it will be a difficult year. Yes, during a mania stage anything is possible, but with each passing week, the clock is ticking."
Remember March 4, 2014 — a day that will go down in Wall Street history as the beginning of the end for this latest bull market, which is about to celebrate its fifth birthday.
On March 4, the Dow Jones Industrial Average rose 227 points based on a report that Russian troops were pulling back from Ukraine’s border. This “news” lit the market on fire, a sign that the market is heading into a mania stage where it doesn't take much to boost stocks.
Indeed, nowadays instead of the “Nifty Fifty” stocks that defined the late 1960s market, we have the likes of Facebook, Tesla Motors, and Chipotle Mexican Grill — the new new things.
Can the market go higher? Sure, although the higher it goes, the more dangerous it becomes. Often, during the latter stages of a bull market, the market separates itself from reality and appears to be on another planet.
Such red flags are everywhere:
1. Retail investors have been pouring money into stock mutual funds. The fear of missing out on the sixth year of a bull market has created something close to a buying panic. Although not as maniacal as we saw in 1999, the stock cheerleaders are back and rooting for their stocks and mutual funds to go higher — just like they always do before a crash or bear market.
2. The Investor’s Intelligence survey is concerning. The closely watched II survey shows a low proportion of bears (less than 20%), which some have pointed out is the lowest proportion since just before the 1987 crash.