It's always humorous (and pitiful all at the same time) when I hear commentators on financial TV stations say that we're not in a stock market bubble...or when they say, "this time it's different".
It's never different. History repeats itself. People get caught up in the euphoria and they don't want to believe that it could ever end. Why? The emotion of greed has gripped them so strongly that they want to believe that their 401k and IRA balances will eternally go straight up. But that is a fantasy...not reality!
For instance, look at the stock market bubble that led up to the 2000 stock market crash. And look at the bubble that formed up to the 2008 crash.
See the angles of these trends. They're the same as what we have now. Parabolic moves are one of the surest signs of a bubble...and that's exactly what we've got now!
S&P 500 1978-Present
Next, look at the size and magnitude of the previous bubbles compared to this one. This one trumps them all!
By the way, look at the crash of 1987. While it was swift and rough, it pales in comparison to the bubbles and bursts that came in the future.
Now let's look at this same chart again. Notice how long the price of the index has been away from its blue, 200-week moving average. It looks just like the bubble that led up to the tech bubble popping in 2000. Also, look at how far the price of the index is stretched above its 200-week moving average. It's stretched further than it was when the bubble popped in 2000 (and certainly more than when the bubble popped in 2008).
Additionally, we know from Elliott Wave analysis that uptrends have five waves higher overall. And these waves are more distinct and easy to see than those in the past. In fact, look at how long wave 5 is! (It starts where wave 4 ends...which is where the number 4 is at on the chart).
Wave 5 has been in effect for almost two years now and is long-in-the-tooth for sure. Coupled with that, the sentiment couldn't be more bullish.
When I've gathered at community meetings or church meetings, the average Joe that works a non-market related job is cheering about how much their 401k or IRA has gone up. Many of them are totally oblivious to the fact that the market is at a place of such high risk, and thus so is their portfolio.
Now...you might say, "So why don't you talk to them and warn them?"
The problem with that is this: When you're near market tops and you start to talk to someone then about markets being overvalued, they think you're the one that's the loon and out of sync with what's going on.
Why I remember just before the crash of 2000, not only could I not talk most brokerage clients out of trimming back their positions and holding more cash but I also couldn't convince most of my fellow broker friends to do the same! That's how thick the greed gets and how it keeps them from viewing the reality of what's before them.
They think they'll somehow sense when the market will turn and they'll get out. They seem to think they'll "feel" the risk and get out. But risks seem the least when they're the greatest.
How risky do you think the market felt in 1999? Or in 2006 or 2007? Not very risky "feeling" at all. Why? Their portfolios were headed for the moon.
Just as I've taught you that at the bottom of downtrends (towards the end of wave C's), you can't talk anyone into buying stocks...when we're approaching the end of wave 5's, you can hardly talk them into selling any of their stocks. Emotion grips them at both ends of the trend (fear in the former and greed in the latter).
And this is why we will forever be "Logical Investors" and not like the masses, which are eternally, "emotional investors".