Remain Silent And Get A Good Lawyer

11 November 2016

As I expected, not much happened in the market until the election.  The Dow Jones remained in the box it found itself in since early September, until last Friday when it broke down 4% from its last all-time high.  Then on Monday the stock market began a week that saw the Dow Jones gain 959 points in the wake of Donald Trump’s election victory.  Thursday and again on Friday the Dow close at new all-time highs.  All and all, a very impressive week for the stock market.

 

 

However, at the close of the week only one other major market index found itself at a new all-time high.  Though a good portion of the indexes in the table below could close at new all-time highs next week should it prove to be just half as bullish as this week.  If this is a bull market, I would expect a good follow through after the strong week we’ve just seen.  If not, the market in the weeks to come will be disappointing to the bulls.  

 

 

Let’s face it; since the Federal Reserve terminated its QE-3 two years ago we’ve continued seeing major market indexes rise up to new all-time highs, yet somehow they’ve failed to produce much in the way of capital gains.  The Dow Jones in November 2014 was seeing new all-time highs in the 17,600 range.  This makes Friday’s new all-time high for the Dow Jones (18,847) only a 7.0% advance from two years ago (11 November 2014).  

 

If a single-digit percentage advance in two years is a bull market to you, then to you it’s a bull market.  Speaking for myself, I believe the entrenched interests in Washington and Wall Street have for decades used the financial markets as political props to appease the public, keeping themselves entrenched in the process.  So seeing the Dow Jones make two new all-time highs this week isn’t bullish to me; quite the opposite.

 

In the chart below, it’s apparent that since late 2014 the Dow Jones (Red Plot) has found it easier to decline than to advance.  Also, since late summer 2015, the Dow Jones’ 200 count (Blue Plot: the number of days the Dow moves 2% or more from a previous day’s closing in a running 200 day count) has refused to decline to a zero count.  Currently it’s at six.  If the stock market is in a bull market, the Dow Jones’ 200 count will decline to the levels seen in the mid 1990s and 2000s, as well as from 2013 to 2015.  If not, we’ll see the count increase into double digits as the market deflates, as happened during the tech wreck and credit crisis bear markets.

 

The thing that keeps coming to my mind when studying the chart below is that all bull market advances are limited.  They continue only for so many days and points; and then the advance is over.  Since March 2009 the Dow Jones has advanced for almost eight years and 12,300 points.  How many more days and points is this aging bull good for?  

 

 

Speaking of new all-time highs; the Dow Jones Total Market Group (DJTMG) saw only four at week’s close, far from the quantities of new all-time highs it enjoyed at the end of QE-3; two years ago.

 

 

Below, the DJTMG’s “Top 20”; the number of groups within 20% of their last all-time highs ended the week at 44, a good way from its peak of 52 seen in July 2014.  But it’s not collapsing either, though it started to last January.  The last few years has been very frustrating for us market bears, as there are plenty of reasons for expecting a serious market decline, a market decline that somehow never materializes.  But unless the market bulls had invested in one of the few hot groups at the end of last January market downturn, which few did, there is little for them to boast about.