The markets are hovering slightly lower on the day with the SPDR S&P 500 ETF (NYSEARCA:SPY) trading at $135.06, -0.30 (-0.22%) and the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) trading at $62.99, -0.06 (-0.10%). As the markets remain near their recent highs, signals of a top are all around. Here are the reasons.
1. The media is euphoric, coaxing the retail investor into the market. Throughout history, when the retail investor jumps in, the top is at hand.
2. The markets have been moving higher on lighter and lighter volume. This tells us that institutions are no longer buying and it is only retail money pushing the markets up. If institutions are not buying, be very careful.
3. Insider selling heavily outweighs insider buying. Insider sells to buys are over 5-1. If the CEO's are selling, there are definite problems ahead. Insiders in theory should know the most about their companies. Selling is never good.
4. Apple Inc. (NASDAQ:AAPL) crossed the psychological $500 level. This was a target which has now been achieved. As the little investor rushes to invest, the large players sell. Classic top name reaching a psychological milestone is a warning to all.
5. The Facebook IPO has hyped the markets and got the little investor to once again invest. In 2007, The Blackstone Group L.P. (NYSE:BX) was the Facebook of its time and its hyped IPO nailed the top now. As every little investor wants to own Facebook, history is repeating itself.
6. Wall Street is now programmed to believe everything will be fine around the world. Do you notice how credit downgrades have almost no impact anymore on the markets? Do you notice how bad news barely drops the market for an hour? The markets have been conditioned to think the world has been saved. This puts Wall Street on the edge of a cliff. Any shocking news that cannot be brushed off will cause an epic sell off. Reality is that Europe is still an ugly mess and not even close to better. Once realized, the markets will correct.
7. Barrons cover sported DOW 15,000. The last time a cover showcased something like this was in 1999-2000, just before the Dot.com bubble burst. In addition, other magazines sported people hugging their houses in 2007, nailing the top on real estate. Be warned.