Thirteen Reckonings Hanging in the Balance
A Fake Money World
The NASDAQ slipped below 8,000 this week. But you can table your reservations. The record bull market in U.S. stocks is still on. With a little imagination, and the assistance of crude chart projections, DOW 40,000 could be eclipsed by the end of the decade. Remember, anything and everything’s possible with enough fake money.
Driven by a handful of big cap tech companies, the Nasdaq Composite has made new highs – but the broad market (here shown in the form of the NYSE Index) has not even made it back to the January blow-off peak. It is a good bet the return of the average investor’s portfolio mirrors that of the latter. Such divergences are typically a sign of steadily weakening market internals which are seen near major trend changes. When such a glaring divergence in performance persistently fails to be invalidated and keeps dragging on for many months, it tends to be particularly concerning for the longer term outlook, Note that even more glaring divergences exist now between US stocks vs. European and EM stocks. Despite the fact that US economic indicators remain strong and no obvious recession warnings are evident, we have yet to see such large divergences resolve without a hiccup. Usually the hiccup turns out to be quite a doozy. [PT]
Still, we consider DOW 40,000 to be about as probable as having a dinosaur step on our car as we drive to work today. More than likely, a return to DOW 10,000 will first grace the front page of the Wall Street Journal.
In the interim, while still in the delight of this “permanently high plateau,” we’ll turn our attention to another equally suspect record that’s presently unfolding with imperfect precision.
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