If you are wondering what a contra is - its an indicator that the market has gone too far, and ready for a tumble. One of the most famous, possibly made-up example, is Joe Kennedy selling the stock market after getting stock tips from a shoeshine boy in 1929. The cover of the Economist is seen as a leading contra indicator - and has been subject of studies. In my working experience, the cover from late 2009 lauding Brazil was as close to a perfect contra indicator as you could get.
And indeed, it marked the top in EWZ US - the MSCI Brazil ETF.
So is this the top in the US? Well unfortunately, there have been plenty of contra covers on the US in recent years - all of them wrong.
Why did the Economist cover indicator used to work? And why does it not now?
