Been looking at market patterns lately and wondering what signals actually matter when spotting these cycles early.
What indicators do you guys watch for? Volume changes, sentiment shifts, or something else entirely?
RSI divergence is useful. If the price hits new highs while RSI lags, it often signals fading momentum.
Watch for volume patterns that don’t match price action. When markets keep pushing higher but volume drops off, that’s usually a red flag.
I also track correlation breakdowns. During healthy markets, different asset classes move independently. But when everything starts moving together - stocks, commodities, even safe havens - it means fear is creeping in.
The dollar strength usually tells a story too. Sudden spikes in DXY often coincide with capital fleeing risk assets.
One thing I learned from 2020 - central bank policy changes matter more than technical indicators. When they start talking about tapering or rate hikes, that’s when cycles really shift.
Monitor shifts in credit spreads and spikes in volatility. A VIX above 25 while corporate bonds decline often signals trouble. Price movements reveal much; new highs on low volume followed by sharp dips indicate weakness. Key indicators include margin debt, insider selling, and the phrase ‘this time is different’ in media. Peaks in these metrics often precede downturns.
Price action gets weird before big moves happen.
Economic data releases can give you early warnings that most traders miss. Employment numbers, inflation prints, and GDP revisions often show weakness months before it hits asset prices.
I watch for when fundamental data starts contradicting market momentum. If unemployment ticks up while stocks keep rallying, or inflation stays sticky while bonds ignore it, those disconnects usually don’t last.
The key is focusing on a few reliable signals instead of trying to track everything at once.