Monday, October 8, 2018
The Dow Jones Industrial Average notched its 15th record close of the year this week, but not all analysts were enthused. Jason Goepfert, president of Sundial Capital Research, noted that the overall market isn't nearly as bullish as the Dow would indicate.
The Dow Jones Industrial Average is made up of just 30 of the largest stocks traded, but for a bigger picture many analysts turn to measures that track the thousands of stocks traded by looking at a measure known as 'market breadth'. The disconnect between the benchmark index and overall market breadth, such as is happening now, tends to occur when a narrowing group of stocks props up the overall market.
Goepfert tweeted a chart showing past instances when the Dow hit a 52-week high at the very same time that less than 50% of all stocks traded on the New York Stock Exchange were above their long-term 200-day moving average. The last two times this scenario has happened were a cluster in 1999, right before the dot.com crash of 2000, and again in 2007, just before the financial crisis of 2008-9. (Chart from SentimenTrader)