Back in end of Aug’21, I had a group call with some fellow investors wherein we were discussing everything markets. One observation that I shared during that discussion was how a lot of investment/holding companies were suddenly moving higher & breaking out.
One of the investors who has a lot of market experience quickly commented that such move in investment/holding companies is typically a sign of market excesses.
At that time, I didn’t really paid much heed to that comment, but looking back it looks to have played out so well; our markets topped out just a month later in early Oct’21.
Now this could be something like a one-off or a coincidence of sorts. But as with most indicators whether technical or fundamental, nothing works perfectly in isolation. It is when many varied indicators point to a same event is when the probability of that event actually materializing is the highest.
And thus, this holding/investment company indicator is something that I have added to my arsenal of possible indicators of market tops; which includes the following (but not limited to)-
1. Heighten IPO Activity including-
2. When people stop paying attention to risks
3. New Metrics
4. Sectoral Tops
If a lot of new sector specific new fund offerings or new listings starts happening, then that is typically a top for that sector.
Let us know in the comments section if you know of any such interesting indicators.
That’s it for this week, new insight coming up next week. So stayed tuned!
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