Greg Guenthner

I have a secret to tell you about the new all-time highs the Dow recorded this week.

It’s not about an impending market crash. It’s not about panic or a disconnected economy, or any of the other themes the media has bombarded you with this week.

No, the secret I want to share with you is simple. Yet it has been almost completely overlooked since the Dow Jones Industrial Average posted fresh highs Tuesday and Wednesday.

The truth about these new highs is that they don’t matter–at least not the way you think they do.

It is all too easy to look at this week’s market milestones through the lens of crisis. Folks want to know why the markets are rising while the economy feels stagnant. Jobs and income aren’t back to levels we saw before everything got out of control. Europe is a mess. Need I go on?

Investors continue to replay the financial crisis carnage. And they expect the markets to do the same. Their wallets and psyche remain damaged. They do not trust the stock market anymore–and many of these same investors have fled to bonds. They have yet to participate in the cyclical bull that emerged in 2009…

Of course, the stories surrounding the newest Dow milestone reflect this mood.

One of my favorite comparisons is these new highs signal that the Dow is heading for a crash that will mirror the 1987 panic. If this is true, the market will need to punch it into overdrive, considering that the year-over-year gains the overheated Dow posted at its 1987 high were a whopping 44%.

Looking back to more recent market tops, it is important keep in mind just how different the sentiment picture is today than it was in 2000 or 2007. During the dot-com boom, consistent moves higher were never questioned. Stocks could not possibly lose value. Even smack in the middle of a secular bear market, the 2007 highs were also met with little scrutiny from the mainstream press. Americans–flush with cash from an unprecedented housing boom–had yet to feel the pinch of a sharp recession. Most investors were in a position to take risk.

That’s a very different sentiment picture than we’re experiencing today…

Remember, new highs aren’t market tops. In fact, hundreds of highs registered during the bull markets of the 50’s, 60’s, 80’s and 90’s. Tops are only visible with the aid of hindsight. Once the market slogs through the final legs of the lost decade, the idea of constantly announcing new highs will quietly disappear.

Greg Guenthner
for The Daily Reckoning

Greg Guenthner

Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.

Recent Articles

Give Your Book Away For Free, Make More Money

Chris Campbell

The publishing industry is on its head. These days, it makes more sense to make money before you write your book and give it away for free once you do. In today’s Laissez Faire Today, Chris Campbell shows you how to create a hit with those two counterintuitive steps. Read on…


How to Poke the Russian Bear in 3 Easy Steps

Greg Guenthner

Interested in buying the dip in Russian stocks this morning? Before you do, let’s try to knock some sense into that skull of yours. Late last week, I reminded you why we bid farewell to the big Russian bear back over the summer. At the time, Russia was one of the cheapest markets in the world. But cheap can always get even cheaper—and Russia is certainly no exception. With comic book supervillain Vlad Putin manning the controls from his secret Siberian lair, the Market Vectors Russia ETF (NYSE:RSX) has dropped a cold 20% since registering its late June highs. Does it have a shot at rebounding? Greg Guenthner explains…


Why Malpractice from the Fed Will Undermine Growth

Steve Forbes

The latest friend of ours to weigh in on the topic of the value of your money is Steve Forbes. As you’ve been reading this week, we paid a visit to Mr. Forbes recently, to discuss his latest book, Money. In this essay, you’ll find his thoughts on currency devaluation… it’s impact of economic growth and your investments…


Video
The Two-Pronged Approach To Safe, Consistent Gains

Steve Forbes

What causes individual investors to underperform the market year after year? Volatility? The Fed? In today’s video, Steve Forbes reveals what’s sabotaging your investment strategy – and the simple steps you can take to see consistent gains.


The Real Reason the Global Economy is Such a Mess – and How to Fix It

Steve Forbes

Why is the global economy such a mess? Why can't the world's foremost economists and financial thinkers seem to get it right? Simple... They don't understand the most basic element that makes up an economy: money. And as Steve Forbes explains, it all stems from the incorrect assumptions of a general theory of money. Read on...


Laissez Faire
Why Democracy Isn’t All It’s Cracked Up to Be

Chris Campbell

Is Democracy really all it's cracked up to be? And, more importantly, does Hong Kong really need it? China's wayward island already enjoys many of the freedoms of most democratic countries including free business, free trade and even low taxes. Chris Campbell ponders this idea today as he observes the protests from afar.