How Much Longer Can The Bull Market Go On?

Since November 10 the stock market has become an amazing machine relentlessly advancing ever upward.In the past sixty eight NYSE trading sessions; the Dow Jones has closed at a new all-time high in twenty six of them. That’s 38% of the trading days of the past four months that saw the Dow Jones close at a record high.Wow!

How much longer can that go on? Most likely long enough to make us bears look foolish for refusing to believe the current advance isn’t a permanent feature in the stock market. But it isn’t. Look at the Dow Jones BEV chart below. Within the circle, since early November, it’s as if market declines have been outlawed, and we know that isn’t going to continue forever. The next time the Dow’s BEV plot breaks below its -2.5% line (see table in chart), I expect the current good times for the stock market bulls will be over.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 484\Chart #1   DJ BEV 2013_2016.gif

Trading volume for the thirty blue-chip stocks comprising the Dow Jones (Red Plot below) remains very healthy. What’s so odd about this is that beginning last November, for the first time since January 2000, rising Dow Jones volume is seen with an advance in the Dow Jones itself. 

The chart below only goes back to 2010, but until last November, all market advances only occurred as trading volume declined, and trading volume only increased during market declines. This was an inversion in the law of supply and demand that began in January 2000 as the NASDAQ High-Tech bubble began deflating seventeen years ago. So what changed in November? I haven’t a clue, but something did. 

The day is coming when the current advance in the Dow Jones will only be a pleasant memory. When that happens, I’m wondering will trading volume contract as it should during market declines, or will it once again explode upwards as the Dow Jones deflates.  

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 484\Chart # 2   Dow Jones & Volume 2011-2017.gif

This is an important point to be aware of; because if trading volume doesn’t expand on the next stock market decline, it’s telling us the “policy makers” have decided to allow the stock market to deflate. When that happens, as one day it must, I expect that the world will be shocked at how far the stock market will decline. I expect this will also prove to be true for the bond market too, as bond yields follow dividend yields upwards.

Ultimately, the financial markets will experience a selling panic that will make history, with the precious metals markets to be one of the prime beneficiaries of the flow of flight capital fleeing deflation in the stock and bond markets. But until then, we long suffering bulls in the gold and silver markets will just have to be patient.

Last week I wrote about a bull box forming in the Dow Jones, and this week I’m closing the box. I have to; the past seven NYSE trading sessions saw the Dow Jones close at new all-time highs, and those seven advancing days closed the box. And as expected, with the closing of the box the Dow Jones itself was up nicely; 570 points, or 2.84% since Wednesday February 8. In the short term, I expect the stock market will continue advancing.

C:\Users\Owner\Documents\Financial Data Excel\Bear Market Race\Long Term Market Trends\Wk 484\Chart #3   Dow & SS 2006-17.gif

So much for the Dow Jones.How are the other major market indexes doing at the end of the week? Of the twenty three I follow, the top twenty of them ended the week either at a new all-time high, or within 1% of being one.

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Moving on to the Dow Jones Total Market Groups (DJTMG); the end of the week found 17 of the 74 groups I follow making new all-time highs; an increase of seven from last week. After seeing the Dow Jones and the major market indexes advancing since early November, are we going to see new all-time highs in the DJTMG increasing into the 20ies in the weeks to come?

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