In recent months, some market experts have warned that investors should expect a recession in 2024. These fears accelerated recently, leading to most stocks recording significant losses.
Notably, amid recession fears, some analysts maintained that investors should expect a possible rally in stocks to the highest level before a downturn hits. In this line, Finbold turned to OpenAI’s artificial intelligence (AI) tool ChatGPT-4o to gather insights regarding the timelines for a blow-off top in 2024.
To begin with, the AI tool noted that the concept of a “blow-off top,” a rapid surge in asset prices followed by an equally swift decline, has always been challenging to predict. However, ChatGPT-4o identified key indicators and periods in 2024 that could signal when this phenomenon might occur.
Picks for you
Factors influencing the next stock blow-off top
The AI model emphasized that while predicting the exact timing of a blow-off top is difficult, clear patterns and signals exist that investors should monitor. These include technical indicators, shifts in market sentiment, macroeconomic triggers, and historical cycles.
ChatGPT-4o highlighted parabolic price increases, characterized by steep and rapid asset price rises, often setting the stage for a blow-off top. When growing trading volumes accompany such increases, the likelihood of a market peak grows.
Additionally, a divergence between rising prices and weakening momentum indicators, like the Relative Strength Index (RSI) or Moving Average Convergence Divergence (MACD), could indicate that the rally is losing steam.
The AI model also identified euphoria as a critical component of a blow-off top. When market sentiment becomes overwhelmingly bullish, with investors showing little regard for underlying fundamentals, the risk of a market peak increases. ChatGPT-4o pointed to a surge in retail investor participation, driven by fear of missing out (FOMO), as another red flag. Historically, these conditions have often preceded sharp market reversals.
Interest rate hikes by central banks could play a pivotal role in triggering a blow-off top, according to ChatGPT-4o. If rates are raised aggressively to combat inflation, markets could experience a sudden shift as investors rush to exit positions. The model warned that unexpected geopolitical events or economic crises could precipitate a blow-off top, especially in overheated markets.
Timeline for next blow-off top
Drawing on historical market patterns, ChatGPT-4o noted that major market tops often occur near the end of long bull markets, following periods of low volatility and steady gains. The AI suggested that if the current market conditions in 2024 resemble those of previous tops, it could serve as a warning sign.
While the exact timing remains speculative, ChatGPT-4o identified late Q3 and Q4 of 2024 as periods of heightened risk. The model suggested that if markets continue to rise steadily without significant corrections and sentiment remains bullish, a blow-off top could occur by the end of 2024 or early 2025.
In the meantime, the stock market continues to record notable gains, attempting a recovery as attention remains focused on the Federal Reserve’s next move regarding monetary policy.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
