Once again, the Dow Jones closed the week at a new all-time high, another BEV Zero in the Bear’s Eye View chart below. That makes 82 new all-time highs since last November’s presidential election. That is 30% of the Dow Jones’ daily closings of the past year have been at new all-time highs. Also, going back to 1982 in the BEV chart below, the true beginning of the current market advance, never before have we seen a concentration of BEV Zeros that simply refuses to correct down to the BEV -5% line.  It’s been that way since July 2016.

Next is the Dow Jones (Blue Plot) with its 200 count (Red Plot), the number of days the Dow Jones has moved +/- 2% from a previous day’s closing price in a running 200 day sample. You can tell when Mr. Bear is near; the Dow Jones’ 200 count begins rising as the Dow Jones itself comes under pressure.  

Currently the Dow’s 200 count is at zero, and has been since August 23rd. Small wonder as the last time the Dow Jones saw a 2% day (day of extreme market volatility) was on November 7th of last year. The day before Donald Trump was elected president, the Dow Jones saw a 2.02% decline from its previous day’s closing price. Since then it’s been up, up and away with the Dow Jones advancing 6,070 points or 33.24% in the past thirteen months.

What will the next thirteen months bring?  I’m out of the market prognostication business, so don’t ask me. I’m just sitting in the bleachers, eating peanuts and enjoying the game. This is my market strategy, until I see the 200 count for the Dow Jones above begin rising up from its current zero. There’s just no reason to expect the stock market to come under pressure until that happens, plus a return of days of extreme-market breadth (NYSE 70% A-D Days / chart below) as common market events.

The last NYSE 70% A-D day occurred on August 10th of this year, a -71.89% A-D ratio. In other words on a day where 3088 issues were traded at the NYSE, only 406 of them closed higher, while 2626 closed down and 56 UNCH. Keep in mind NYSE 70% days are rare market events.  Since 1926 there have been only 384 NYSE 70% A-D Days, though in the chart they appear more numerous than that. But the vast number of them have occurred in the two clusters, one during the depressing 1930’s, the other beginning in early 2007.

The current cluster began in February 2007, as the sub-prime mortgage debacle first entered the public’s awareness.  What’s interesting is during the eighteen years of Alan Greenspan there were less than ten NYSE 70% days.  A year into the Bernanke Fed, all that changed when NYSE 70% A-D days became frequent market events. Ten years later a monstrosity of a cluster of days of extreme market breadth (NYSE 70% Days) has formed in the chart below, a technical pattern not seen since the Depressing 1930s.  

What does it mean?  Well, in my professional opinion – nothing good.  Keep in mind the financial markets today are managed, but the market stands on a fragile foundation of tens of trillions of dollars of dubious debt, and hundreds of trillions in derivatives to hedge “market risks.”

That our cluster of extreme days of daily breadth at the NYSE began as the sub-prime mortgage market first began showing cracks in early 2007 is telling us something. I believe it’s that for all the apparent success the financial markets currently are having, disaster is only one black swan event away.  An unanticipated event in the debt or derivatives markets that the market’s managers will prove to be a day late and a dollar short of correcting.

Keep in mind how before the sub-prime mortgage crash of 2007-09, the global banking system was insanely leveraged. In 2008 it only took a 5% to 10% decline in real estate valuations to wipe out the equality positions of the big houses on Wall Street; they were flooded with counter-party claims to derivatives they wrote that they couldn’t pay.  Wall Street owed trillions they didn’t have, so Washington’s entrenched political class bailed the banksters out with tax payer’s money.

If today the Dow Jones can’t seem to make a correction of only 5%, there is a reason why that would be. The most likely is that the “market’s regulators” are concerned that such a decline creates the possibility of another derivative disaster, as happened in 2008 with sub-prime mortgage derivatives.

But as Christmas of 2017 approaches, the famine of extreme days of volatility and market breadth in the stock market tells me all is well. Well, as good as things can be in a world wallowing in consumptive debt hedged with fraudulent derivatives. How good is that?  The Dow Jones Total Market Group (DJTMG)’s top 20 increased to 52 at the end of the week. Last summer I wouldn’t have believed that was possible, but here in December this is now our reality.