The stock market is in a tender condition.  Caution and selectivity, and possibly reduced allocation to equities with above average cash, is a reasonable approach for investors, particularly those who have accumulated most of the assets they are going to accumulate in their lifetime.

Investors far from retirement, or with substantial excess assets beyond their retirement needs, can be more aggressive and weather more severe market downturns waiting for price recovery.

Investors who are relying, or may soon rely on their portfolio to support lifestyle, and who do not have excess assets, have reasons to err on the side of caution; because portfolio value declines during fixed Dollar withdrawals shorten the “life expectancy” of the portfolio.  It is important for those investors that their portfolio live at least as long as they do – to avoid the “risk of ruin”.

Market timing is not a good idea for almost everybody.  It more often than not results in long-term underperformance, as a result of getting out late and re-entering late – thus leaving performance on the table.  Most peaks and troughs are too close together in price for most people to extract value by timing.  However, in the case of infrequent major marker reversals, exiting and re-entering, even if a bit late, can result in outperformance (the DotCom crash and the 2008 crash being recent examples).

We certainly face a market decline of some sort sooner than later, but the question is whether it will be garden variety (stick to your allocation) or major (get out of the way).  So what are the typical signs of a developing major market top?   A major top tends to develop when SEVERAL of the 12 factors listed below manifest themselves and CONFIRM each other in trends within broad market indexes.  The Treasury yield curve indicators are perhaps the most powerful and most important of the indicators.