The US S&P 500 index has just recorded what is being described as the longest bull market in modern history and the index is now higher than the record in February, from which we saw an 11.8 per cent sell-off in 10 days. The US market is very close to being technically “overbought” once again, a rare occurrence for such a large index and it is now also trading at the top of its six-month trading range if not busting out to the upside.

When the sharemarket is at high altitude, it needs less of a reason to fall. Credit:Greg Newington

Scanning the newswires it is also clear that one of the early indicators of a market top, the number of articles talking about a market top, is also on the rise. From one day on Livewire this week came the headlines “How to catch the top”, “Ageing bull market approaches seasonally weak September” and “When to hold and when to fold”.

As the market rises it is a natural human investor assumption that what goes up must come down, otherwise known as mean reversion, a financial theory suggesting that asset prices that spike or dive eventually return to the long run average. On which basis we are now watching the current equity market blow off and wondering when the sell-off is going to come.

But selling because something has gone up is the most amateur of mindsets and typical of human wiring that is not naturally engineered for investment.