All the Hallmarks of a Major Market Top

Strange market action and heightened volatility recall past bubble peaks.

Key Takeaways

• Wild Swings Can Indicate a Market Top: Between November 3^rd and November 21^st, we saw eight huge daily selloffs in the Dow and seven massive increases. Over that time frame, the blue-chip index was down by nearly -1,100 points. This is just like early 2000, when by mid-April, through a wave of big ups and big downs, it was off by -1,400 points from the January highs — and yet everyone at the time still believed the bull market was intact.

• Soft Survey Data from Philly to Richmond: The soft survey data continue to get even softer, and now we have the Philly Fed non-manufacturing index coming in contractionary, at -16.3, for November. The Richmond Fed’s business conditions index eroded sharply in November to -15 from -1 in October. The manufacturing segment turned in the same headline reading of -15, versus the print of -4 the prior month (contracting now for each month since last March). If you look at the aggregate of all the survey evidence, the U.S. economy stopped expanding mid-year.

• ADP Data Point To October Job Losses: With the nonfarm payroll data still lagging behind as the government statisticians play post-shutdown catch-up, we continue to find private data sources more timely and illuminating. ADP finds that employers shed an average of -13.5k jobs per week in the four weeks through November 8^th — in other words, a total of -54k jobs. While the ADP data only capture a subset of total U.S. employment, it is correlated with overall nonfarm payrolls and strongly suggest that the U.S. private sector shed jobs in October in the payroll data.