what signals the end of the bull market right before it crashes?

what signals the end of the bull market right before it crashes?
will it be a sharp drop or a slow bleed off in price?
and at the very end of it where is the basement in price?

4/oz? 8/oz 24/oz?

defend your answer too please...like reasons why and such...

 

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What market are you referring to? Coins (what PM), Stocks, Futures, physical bullion (what PM), etc? It's difficult to be specific when your question is so ambiguous.

 

There are a few signals to look for:

Widespread public participation
Widespread use of leverage
A can't lose mentality
The price goes parabolic with a sharp price rise of as much as 100% in a fairly short time frame
Prices far above intrinsic value which in the case of PMs would be the cost of production
Magazine covers extolling the virtues of that particular investment
Heavy IPO activity for companies, ETFs, etc... in that industry

These are, by necessity, general observations and may not be what you are looking for. But as the old timers used to say, "nobody rings a bell at the top." It isn't easy.

 

My opinion on this is based on what I've heard from Mike Maloney, not because I think he's all knowing, but it just makes sense to me. Pegging a top isn't about price, it's about buying power. As I've referred to in the past (and it is often disputed so don't take this as a sure thing) the DOW/Gold ratio is on a downtrend, and if it follows its historical paths it is on it's way to a 1:1 ratio. This is when I would consider a top in metals.

 

I agree with the historic ratio. I'm not sure it can be used as a guide now because the DOW average is a weighted index (not an average) of just 30 companies. Since the financial crisis started, they have moved 10 companies on and off of it. Now the interesting part is the average is now controlled by the CME, the same guys who own the futures market for PMs in the USA.

I'd be more interested in the historic ratio of gold to the S&P 500.

 

Very good post. I agree. The other problem with even using the S&P, (though I believe it would be more useful), is the fact so many public companies are now international. This will have the effect of muting any US problems that used to be more highlighted using such a ratio. Before a weak dollar would lower stocks and raise gold, allowing such a ratio to happen, but now a weak dollar will raise Corporate earnings to the extent they are earned in other currencies.

Personally, I believe 2008 demostrated that this relationship between the Dow and gold will never be 1-1 again due to changes in market structure. If 2008 did not drive such a ratio, I am not sure what could short of a total meltdown.

As to the OP question, I believe Cloud has good answers as well. Its hard though since tops are not all the same. Typically you will experience greater volatility near a top, but for every rule of thumb you can put forward, you can find exceptions to the rule. If it was easy everyone would know it. Overall I think you have three good responses to your question Alex, they don't completely agree but all have validity.

Chris

 

Components in the DJIA change all the time. The posts here got me curious so I checked it out. There are two wikipedia articles of interest. The DJIA has changed 14 times since gold has freely traded, 48 times in its 115 year history. None of the original 12 companies are in the average.

http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average#Former_components
http://en.wikipedia.org/wiki/Historical_components_of_the_Dow_Jones_Industrial_Average

So I think 1:1 is still possible. In fact I've read some people that believe the DGR is in an expanding triangle. For those who are unfamiliar with technical patterns... just means < 1:1. I think this person's target was 2:1 (DGR 0.5). Either case I wouldn't try to time the top. Scale out of your position over time.

 

Well now, if any of us really knew the answer to that, we'd all be smokin' big cigars with pretty girls on our laps, now wouldn't we So all we can do is take a guess. What I have found useful, although not very technical, is when the crazies come out to play. What I mean by that is when you hear people saying gold is going to hit $5000 or silver is going to 200 it is time to go short. There really is some logic to this as it really is a simplified version of what Cloudsweeper was saying. But in the end, you pays your money and you take your chances.

 

I'll tell you what signals the end of the bull market:

YOU putting all YOUR money into it.

Yours truly,

Murphy

 

I wonder if miners will fill all orders for gold, and silver, and be paid in Fiat currency in 2012 ?
They could watch supply, drive price, to a point where they were making as much profit with less labor.
Sitting back a bit they could see if any region, would attempt to back with a small amount of gold or silver.
Some one has to get serious about world debt !!

Pep

 

yes.

'cause I said so

 

Sounds like 6th grade.

 

Alright then people, the top is in. I already did this lol. Well I do have enough cash to pay bills. But seriously, regarding the OP's question I think we need to look at why metals are in a bull market. Is it the national debt? Is it the money printing? Is it negative real interest rates? I would say all 3. I don't see any indication that any of these things are abating, but if any of them do I might start easing my position a little.

 

I have found over the years that the most positive sign of a sharp decrease in value is a large purchase by myself.

The day after I jump in hard, the market is sure to decline. Do not ask me why, I just know that it does.

gary

 

Boo Hoo!! That's my cousin Louie! :so-sad:

 

What signals the end of a bull market would be a bear market.

 

I cannot help but feel the experts are overlooking a very vital factor in the silver market. That is, today for probably the first time in history, the market may actually be consumer driven by the small investors. With the advent of the internet, buyers and sellers the world over can trade. I see silver, because it can be affordable for the very small investor.

Now, a guy working someplace in China, can buy and receive silver bullion or coins on the internet and have it delivered to his door. Everyone, the world over has a distrust of soft currency, and great numbers of people hoard an amount of PM's. The Chinese government has lifted the ban on PM ownership. A lot of people can invest that cannot afford gold. I mean how much silver can be hoarded by 1 billion people. Toss India into the mix and there is a large consumer base. People who just want a little insurance for their families.

Perception is causing the base to stay as high as it is. IMHO
Silver may only be worth $10, but people see $29 as a bargain, so the base has risen to $30 and could go very high. I just don;t see the bursting of the silver bubble.


gary

 

One thing to keep in mind is that whenever items become available on the internet as well as B&M outlets, it has tended to drive the price down, not up, because the range of suppliers expands as well as the range of customers. So your observation may be correct but the outcome may be different.

 

This doesn't resonate for me. For retail goods, Internet sellers can cut out the middleman or cut out the expense of B&M storefronts, reducing margins -- but "consumers" don't have visibility into the pricing structure, the way they do with PMs, which have their spot prices posted widely in real time.

What I'd expect to see is "customers" less willing to pay a huge markup over spot when buying, AND less willing to accept a huge discount when selling. In other words, I'd expect a general tightening of margins, but not general downward pressure on prices.

To put it another way, has the explosion of online trading services driven down the price of stocks? Not as far as I can tell. It may have driven down commissions, but I think the effect on prices is generally symmetrical (downward pressure and upward pressure balance).

 

It's the same thing. And since margins on PMs have generally been much greater than on, say, stocks, the effect is noticeable. All things considered, I think the creation of ETFs like SLV have a greater impact on the price than being able to buy silver from online dealers.