Not much new with the stock market this week. With the market advancing that isn’t bad news. Last week the Dow Jones closed at new all-time highs on each day, but did so only on Tuesday this week. Still on a weekly basis, the Dow Jones found itself at a new all-time high on Friday’s close. On a daily basis, as seen in the Dow Jones BEV chart below, it ended the week only a hair’s breadth from breaking above last Tuesday’s daily all-time high (7.75 points / 0.03%).  Expect the Dow Jones to continue making new all-time highs again next week.

Below is the Dow Jones (Blue Plot) going back to 1996, with the NYSE’s 52Wk net H-L step sum (Red Plot). For the 52Wk net H-L step-sum plot, each day with more 52Wk Highs than Lows it’s a +1, more 52Wk Lows than Highs and is a -1; this data is then used to construct a single item A-D line I call a step sum.  A rising red plot identifies those periods of market history where 52Wk Highs dominated the NYSE, a declining red plot those times when 52Wk Lows dominated.

Typically the 52Wk net H-L step sum and the Dow Jones are in synch with each other. However that wasn’t true during the last half of the 1990’s high-tech bubble. The reason for that was the late 1990’s was a bubble in high-tech, and not much else. So, many NYSE issues actually began deflating in their own private bear market as much as two years before the NASDAQ and Dow Jones.  

The question I have is why DIDN’T the Dow Jones, a distinctly old-fogey market metric from the 19th century, top in 1998 as did the NYSE’s 52Wk net H-L step sum?  Well it didn’t. Instead it continued going up with Microsoft, Intel and the NASDAQ until 2000, making yet another of those oddities we find in today’s highly “regulated” market place.

As it turned out, at the October 2002 bottom of the High-Tech bear market, the Dow Jones and the NYSE’s 52Wk net High-Low step sum recoupled, and they have remained so for the past fifteen years. Currently, the NYSE’s 52Wk net H-L step sum plot turned up in February 2016, and like the Dow Jones, has been going up ever since.

But the day is coming when the NYSE’s 52Wk net H-L step sum will once again reverse, and most likely taking the Dow Jones with it. Is there any indication of that happening soon? Not really, but I also plot actual NYSE net 52Wk H-L data, using 300 net highs or lows as a threshold (chart below).  I wouldn’t say having a net of 300 daily 52Wk Highs or Lows at the NYSE a rare market event, but the fact is that as bull markets approach their tops, they become increasingly rare market events.

This data is also very useful in bear markets. During the credit-crisis bear market, the #2 all-time biggest percentage decline for the Dow Jones since 1885, 52Wk Lows maxed out on 10 October 2008 with a net of 2891 52Wk Lows. It’s interesting noting that that was also the same day the Dow Jones broke below a 40% decline from its last all-time high, something it hadn’t done since December 1974.

Five months later at the actual credit-crisis bear market lows for the Dow Jones (53.78% decline), there were only a net of 826, 52Wk Lows. That was it for the #2 bear market of all time, as shortly thereafter 52 week highs once again began to dominate the NYSE.

Just take a moment to study at this data since 2008. The current advance in the Dow Jones (Red Circle below) has occurred with the fewest number of NYSE 52Wk Highs since the end of the High-Tech bear market in 2002.

So, it’s important keeping in mind that the last net +300 52Wk High day occurred on June 2nd of this year, five months ago. I can’t say this is the last +300 net 52Wk High day of the advance. However, considering the Dow Jones has advanced 2227 points (10.7%) since June, with  52 week highs increasingly becoming rarer at the NYSE, I’d say this is an indication the current advance market is approaching a top, if not THE top.

But exactly when the top will come in, and then pass on into history, this data is silent on.  A better data series to determine that will be found looking at the Fed Funds Rate and the yield for the US Long Bond below.

The top of both the High-Tech and Sub-Prime Mortgage bull markets can easily be identified below: when the Blue Fed Funds Rate was increased by the FOMC above the yield of the US long bond.  And we also see when the FOMC began inflating bubbles in the sub-prime mortgage market, as well as our current bubble where everything is being inflated, when the Fed Funds Rate is driven far below the yield of the US long bond.