This past week, the Dow crested 23000 sending the networks into a “tizzy.” It took about 5-minutes of crossing that magical “round number,” before questions raised of how long before the markets cross 24,000, and 25,000.
The chart below shows the 1000-point milestones of the Dow going back to 2009. After a long break between 18,000 and 19,000 in 2015 through the election in 2016, the Dow has surged higher ticking off 4-more milestones in less than a year.
As I have shown previously, these late stage “melt-ups” are not uncommon. In fact, as shown below, it is something witnessed prior to every market peak previously.
“This past weekend, I discussed what appears to be the markets ongoing melt-up toward its inevitable conclusion. Of course, that move is supported by the last of the ‘holdouts’ that finally capitulate and take the plunge back into a market that ‘can seemingly never go down.’ But therein lies the danger.
‘However, it should be noted that despite the ‘hope’ of fiscal support for the markets, longer-term conditions are currently present that have led to rather sharp market reversions in the past. Regardless, the market is currently ignoring such realities as the belief ‘this time is different’ has become overwhelming pervasive.’”
With volatility crushed, and record short positions on the VIX, there will likely be an event at some point that leads to a massive reversal in the assessment of “risk” and an unwinding of the market.
However, such is not the case currently as even “small dips” are met with eager buyers which continues to reinforce the very dangerous lack of fear.
With more ETF’s currently available to investors than there are stocks to fill them, it is quite likely the demand ramp for ETF’s will continue to push the Dow higher into the end of the year.
Dow 24,000 by Christmas?
Don’t be surprised if it happens.
Just remember, all market melt-ups end just when things look their brightest.
Here’s your reading list to for the weekend.
Trump, Economy & Fed
- Fed Flunks Econ 101 by Caroline Baum via MarketWatch
- Why The Economy Surged Under Trump by Simon Constable via Forbes
- If Trump Is Doing So Horribly, Why Record Highs by Joe Ciolli via BI
- Trumps Final 5 Candidates For Fed Chair by Pedro Da Costa via BI
- How A Lazy Man Won The Nobel Prize by Tim Harford via Undercover Economist
- Link Between Tax Cuts & Growth Is Tenuous by Kate Davidson via WSJ
- Workers Won’t Benefit From Tax Cut by Larry Summers via The Washington Post
- Trump Tax Plan May Be Doomed by Eric Levitz via New York Magazine
- Ben Bernanke Is Worried, Should We by Robert Samuelson via Real Clear Markets
- Cohn & Mnuchin Risk Their Reputations by David Leonhardt via NYT
- The GOP Has No Budget Plan by James Capretta via Real Clear Policy
- The Long Road Ahead To Tax Reform by Betsy McCaughey via NY Post
- Hassett’s Flawed Analysis Of Tax Plan by Larry Summers via CNBC
- Republicans Love Tax Cuts, But Love Spending More by Kevin Williamson via National Review
- Bear Market Closer With Each New High by Michael Sincere via MarketWatch
- When The Melt-Up Melts Down by Brian Maher via The Daily Reckoning
- Shiller: Most Have The Cause Of The ’87 Crash Wrong by Akin Oyedele via BI
- Risk Your Retirement For A Few Percentage Points? by SA Gil Weinreich via Seeking Alpha
- S&P 500 Matches Uncanny Record For Doing Nothing by Mark DeCambre via MarketWatch
- The Crash Of ’87 From Those That Lived It by Richard Dewey via Bloomberg
- Time To Worry About Earnings Growth by Brad McMillan via Commonwealth Financial
- Up And Away, Dow Tops 23000 by Michael Kahn via Barron’s
- Don’t Be Fooled By These 3-Over Hyped Trends by Greg Satell via Inc
- Why Can’t We Have A Decent Bubble by James Mackintosh via WSJ
- Secular Stagnation No Longer The Dominant Outlook by Sam Ro via Yahoo Finance
- BofA: 10 Triggers For The Next Crash by Tyler Durden via ZeroHedge
- Good Companies Don’t Always Make Good Stocks by Vitaliy Katsenelson via RIA
- Risk Is Underpriced, Perhaps Considerably So by Doug Kass via RIA
Research / Interesting Reads
- Mnuchin Deploys Market Bubble As Political Weapon by Wolf Richter via Wolf Street
- The No. 1 Financial Regret Of Americans by Quentin Fottrell via MarketWatch
- Investors Trust In Goldilocks by Buttonwood via The Economist
- Ivy League Endowments Humbled By Bull Market by Mary Romano via Bloomberg
- Just How Bad Will Your Retirement Be? by Sarah O’Brien via CNBC
- Americans Still Terrible At Investing by Lance Roberts via MarketWatch
- Investors Have All Their Eggs In One Basket by Jared Dillian via Mauldin Economics
- The Next Correction Will Be Much Bigger by Howard Gold via MarketWatch
- Even Borderline Data Will Be Recessionary by William Hester via Hussman Funds
- 52-“WEAK” High For Stocks by Dana Lyons via The Lyons Share
- Buffett’s Method Suggests Stocks Not Fairly Priced by Jesse Felder via The Felder Report
“A bear market returns capital to those who it rightly belongs to.“ – Ian McAvity