Every time a market reaches an extreme, someone starts guessing price targets. Guessing a target means predicting a number produced by the combined behavior of hundreds of millions of people, armed with nothing but mood and old charts. I don’t guess targets. I count signals. There are five for a top and five for a bottom, all observable behaviors, none of them price prophecies. A position counted from a checklist is far more reliable than a target guessed from a hunch.
The top: five signals, count how many you see
- “This time is different” becomes the consensus view — it appears at every top, without exception.
- People around you who know nothing about investing start talking stocks, and talking with confidence.
- The whole industry expands capacity recklessly; new players pour in, capacity blueprints stacking up one after another.
- Valuations break all historical records, explained away by “traditional valuation methods no longer apply.”
- Upstream infrastructure companies report explosive profit growth — the water reaches the shovel sellers first.
None of these requires a model. All they require is open eyes. I ran this checklist against today’s market, specifically the AI industry: this-time-is-different is the consensus, people who know nothing about investing are all discussing it, new players are still pouring in — three or more, already hit. Hitting three does not mean a crash tomorrow. It means you are not buying low at this moment; you are standing exactly where someone needs to hand off their bags.
The bottom: the same list, inverted
- “This industry will never recover” becomes the consensus judgment.
- The whole industry loses money; the leaders start laying people off and cutting output.
- Nobody wants to talk about it; the media has all but stopped covering it.
- Capacity clears out; smaller players go bankrupt and exit in batches.
- Valuations sit in the lowest historical range, and still nobody buys.
There is a living sample of the bottom signals right in front of us: hardly anyone talks about Chinese liquor anymore, and the market’s hot theme has moved on to tech stocks. Did the fundamentals of liquor disappear? No. Only the people discussing it changed. At the top of the last cycle, liquor was what everyone talked about — the same emotion, just attached to a different asset.
Do signals stop working
The strongest objection goes like this: signals are visible to everyone, markets learn, and once everyone trades off the same checklist, the signals should arrive early or stop working. It sounds convincing, but it aims at the wrong target. The content of the signals changes; the mechanism that produces them does not. Greed and fear do not change, capital’s pursuit of profit does not change, and so people will believe “this time is different” at the top and “it will never recover” at the bottom, cycle after cycle. As long as human nature holds, there will always be someone filling out this checklist for you. What changes is only the vocabulary: liquor gives way to tech stocks, tech stocks give way to AI.
A sense of position, not a timing tool
The boundary deserves to be drawn explicitly: signals give you a sense of position, not a timing tool. Three top signals mean you are in overvalued territory; they do not tell you which day to sell. All five bottom signals can line up and the market can keep grinding down for another year. This list does not apply to V-shaped reversals caused by sudden events — war, abrupt policy shifts — where the market’s leg breaks and resets before any observation of behavioral temperature can register. A sense of position tells you winter is coming; it cannot stop a cold snap from arriving overnight. So my conclusion is simple: targets are guessed, positions are counted. Guessing right once is luck; counting right across a cycle is a checklist. The next time everyone says this time is different — will you count first, or believe first?
