The Dow has begun a major rally 13 times over the past 112 years which equates to an average of one rally every 8.6 years. As it stands right now, the current Dow rally that began in March 2009 would be classified as well below average in both duration and magnitude. [As such,] don’t allow the current new highs to scare you away from this market. More gains are on the way in the coming months.
So says Greg Guenthner for The Rude Awakening in edited excerpts from his original article* as posted on dailyreckoning.com under the title The Irrational Fear of New Highs.
[The following article is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and the FREE Market Intelligence Report newsletter (sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.]
Guenthner goes on to say in further edited, and in some instances paraphrased, excerpts:
More new closing highs, courtesy of the Dow Jones Industrial Average, are unnerving many investors…again. The worries stem from the scars of the financial crisis. For the past decade, new highs (or approaching new highs) signal that it’s time to get the hell out. [Nevertheless, while…it’s easy to remember the recent pain, if you take a couple steps back you’ll find that new highs aren’t so ominous after all.
What about when the Dow was making highs in 1983? What about 1992? Or 1995? Each of these appearances of new highs was a strong buy signal. I could go on, but I think you get the point.
Another popular complaint that usually travels with the “new highs are bearish” theme is that the market is overextended. The Dow has chugged higher for more than four years, so another crash is in order.
The chart above shows, all major market rallies of the last 112 (a rally in this case is an advance that follows a 30% decline) years [and] you’ll find the current rally in the bottom left corner. As the chart shows, the current Dow rally has been shorter and less powerful than most post-crash rallies over the past century.
As mentioned in the introduction to this article, the Dow has begun a major rally 13 times over the past 112 years which equates to an average of one rally every 8.6 years so, as it stands right now, the current Dow rally that began in March 2009 (blue dot labeled you are here) would be classified as well below average in both duration and magnitude.
Don’t allow new highs to scare you away from this market. More gains are on the way in the coming months.
[Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.]
*http://dailyreckoning.com/the-irrational-fear-of-new-highs/(© 2013 Agora Financial, LLC. All Rights Reserved.
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