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

From Creditopia to Utopia

Richard Duncan

Our friend Richard Duncan believes the U.S. economy requires credit growth to survive. Here, you’ll see what he thinks will happen if the U.S. doesn’t continue expanding credit. You’ll also find exclusive footage we shot in the Daily Reckoning’s studio explaining how the U.S. could lose it’s global dominance… and how programs like Social Security or Medicare could go bust...


Video
Why Democracy Won’t Survive the New Depression

Richard Duncan

The hum of the printing presses and the steady drip of cheap credit over the past five years made it easy to believe the U.S. economy was in a true recovery. But what happens when the excess liquidity begins to dry up?


Don’t Blame Obama (He Has No Power)

Chris Campbell

The Americans who voted for Obama were expecting some big changes. But, six years later, the government he acquired has only spied harder, the drones have flown lower, and the weapons have gotten bigger. But don’t blame Obama. Read on…


Your Personal Gold Standard

James Rickards

All paper currency has a shelf life. It could be 5 years or 500 years, but at some point, the value of any paper currency eventually reaches zero. That's why, for centuries, people have turned to one shiny metal to safeguard their personal store of wealth. And, as Jim Rickards explains, you still have that option. Read on...


October Plays Another Dirty Trick – Here’s What You Do Now

Greg Guenthner

Bad things have a funny way of happening in October. Remember October 1929? It raised the curtain on the Great Depression. Or maybe you recall the infamous Black Monday crash in 1987. The Dow tumbled 22%— the largest single day loss ever. Guess what? That was in October, too. The 19th to be exact. Notice a trend here? Fast forward to this October... You know what happened this month. And if all that wild market action kneeds you in the gut, here’s what you should do now. Greg Guenthner explains…