It is clearly not so. When Sir Isaac postulated, ‘What goes up must come down,’ he obviously wasn’t familiar with the Dow Jones Industrial Average, the S&P 500, or even the Nasdaq Composite. For even the casual observer can plainly see that the market has ‘slipped the surly bonds of earth and danced the skies on laughter-silvered winds.’* The market has reached escape velocity and is now cruising alone in the ionosphere. So it seems.
Today, alone, the Dow boosted yet another 190 pts, easily eclipsing the 23,450 level. It seems like only a week ago we were all slack-jawed about hurdling over the 23,000 mark. Maybe it was only a week ago at that.
Yet there are reported cracks developing in the heat shield. that protective covering that allows a safe re-entry. Last week’s Technical Tea Leaves were nervous. This week they are positively pouting (but succinct): “Intraday high prices of the market have increased to a 21 day high. Never the less, the advance/decline oscillator is negative. This unusual event is read as a very strong bearish signal that is often followed by a downward price movement.”
Whether the Tea Leaves will tell-the-tale, or whether the market is rational at these levels only time can say. Whichever way it turns out, you have to love John Maynard Keynes’ observation that, ‘The market can stay irrational longer than you can stay solvent.’ There certainly is a chance that the market is fairly rational at these levels based on how many of the individual companies are performing. This segment from Bloomberg Market News today seems to say it is lucid: ‘The Dow Jones Industrial Average hit a record high Tuesday after Caterpillar Inc. and 3M Co. delivered results that topped estimates, while General Motors Co. and Fiat Chrysler NV also rallied on earnings. Benchmark Treasury yields punched through the key 2.40 percent level, while Bloomberg’s dollar index reached the highest point since July…The economy is doing great here domestically, the whole world economy is certainly improving, and we’re optimistic that the market is going to continue to go higher because it is earnings-driven.’ Maybe so.
This week’s strong relative strength ETF performers once again were Rare Earth Metals, (REMX), Lithium (LIT), Semiconductors (SOXX), Home Construction (ITB), and Technology (FXL). Laggards were Mexico (EWW), Telecommunications (IYZ), Natural Gas (UNG), Oil & Gas Services (XES), and Latin America (ILF).
*High Flight; John Magee, Jr. 1941