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

Buy the Dips: Why the Pullback in US Shale is Only Temporary

Matt Insley

Since early July, there's been a sharp pullback in the prices of most major U.S. shale players. Is this the start of a long-term meltdown, or is this simply a great opportunity to "buy the dips"? Matt Insely explores, and offers four specific ways to play the trend. Read on...


A Federal Program that Could Turn Your Town into a Warzone

Chris Campbell

Media coverage of the situation in Ferguson, Missouri has documented a very disturbing trend in local law enforcement... namely, why is a small town police force armed to the teeth with military equipment? Well, as Chris Campbell explains, it's all thanks to a little-known Pentagon agenda called the "1033 Program." Read on...


The New Bitcoin Trend that Could Make You $100,000 Per Month

Josh Grasmick

Few investments have yielded better returns for early investors than Bitcoin. But now that the price has stabilized, are there any gains left to be made? Today, Josh Grasmick details one investable Bitcoin service coming online that could still lead early investors to massive profits... and with less speculation and risk. Read on...


Maestro
Preserve Your Wealth in the Face of Financial War

James Rickards

The Cold War introduced the world to a terrifying new phrase: mutually assured destruction. Thankfully the cold war ended without ever realizing this outcome. But the remnants of that "balance of terror" between the US and Russia still exist... and are beginning to surface in the financial sector. Jim Rickards explains...


How to Use Market Forecasts to Your Advantage

Greg Guenthner

'Tis the season for fall market predictions. But don't dust off that crystal ball just yet. Good traders don't try to predict when an important price move is going to happen - they just react when it does. However, as Greg Guenthner explains, forecasts can help you manage your risk/reward, as well as your non-trading portfolio. Read on...