Dow Jones Industrial Average To The Moon?

David Fry's picture

 

openingimage

 

When you get this close to a record it’s just a matter of time before it gets taken out generally. Why today? Well, China reversed course psychologically by now stating it would expand “deficit spending by 50%” after just Monday putting the clamps theoretically on their housing bubble. That provided a big lift to Asian and European shares. With the latter more ECB talk about defending the eurozone and euro was fed bulls. Global markets also feasted on Fed Vice-Chair (the woman who would be king?) Janet Yellen that QEternity is not gonna change.

 

The Fed then added another $3.3 Billion in POMO Tuesday to keep things going.  

 

Zero Hedge added a nice table outlining economic conditions as they existed during the prior high in October 2007. It’s an interesting comparison. So, what’s different this time? QE and ZIRP.

  • Dow Jones Industrial Average: Then 14164.5; Now 14164.5
  • Regular Gas Price: Then $2.75; Now $3.73
  • GDP Growth: Then +2.5%; Now +1.6%
  • Americans Unemployed (in Labor Force): Then 6.7 million; Now 13.2 million
  • Americans On Food Stamps: Then 26.9 million; Now 47.69 million
  • Size of Fed's Balance Sheet: Then $0.89 trillion; Now $3.01 trillion
  • US Debt as a Percentage of GDP: Then ~38%; Now 74.2%
  • US Deficit (LTM): Then $97 billion; Now $975.6 billion
  • Total US Debt Outstanding: Then $9.008 trillion; Now $16.43 trillion
  • US Household Debt: Then $13.5 trillion; Now 12.87 trillion
  • Labor Force Participation Rate: Then 65.8%; Now 63.6%
  • Consumer Confidence: Then 99.5; Now 69.6
  • S&P Rating of the US: Then AAA; Now AA+
  • VIX: Then 17.5%; Now 14%
  • 10 Year Treasury Yield: Then 4.64%; Now 1.89%
  • EURUSD: Then 1.4145; Now 1.3050
  • Gold: Then $748; Now $1583
  • NYSE Average LTM Volume (per day): Then 1.3 billion shares; Now 545 million shares



Market leaders on the rally were Cisco (CSCO), tech (XLK), small caps (IWM), transports (IYT) and homebuilders (ITB). The dollar (UUP) was slightly weaker and gold (GLD) rather flat. Commodities (DBC) rallied with energy (USO) and grains (JJG). Bonds (TLT) were weaker as stocks rallied. 

 

We posted a short ETF in Focus video featuring DIA (SPDR DJ Industrial Average ETF) and later our colleague David Gillie posted an in depth analysis of gold: “A Casualty of the Currency War”.  

 

Volume despite a record high wasn’t impressive but that’s the way things have been during since QE3 has been in effect. Breadth per the WSJ was positive naturally.