Since they have no self-correcting mechanism to speak of, there may not be much trust in financial markets as they spiral higher toward infinity. What matters most in the impression of prosperity, reinforced by high balances in 401k and various other passive investment funds, the so-called "wealth effect" espoused by former Fed Chairman (and, notably, Nobel Prize winner in economics) Ben Bernanke and the hordes of Keynesian economists that crowd the chasm of economic thought.
The possibility of a correction in the stock market is likely at an extreme low presently, now that kidnapping leaders of sovereign nations has become the market stimuli de jour. Traders celebrated the capture of Venezuelan president and "drug kingpin" Nicolas Maduro with a knee-jerk reactionary rally on Monday, as if taking out the leader of a country rich in resources and within close proximity of U.S. borders ensured that oil companies like ExxonMobil, Chevron, and others would extract precious heavy crude, refine it, and apply the profits directly to their bottom lines.
Just as sure as the sun rises in the East, Chevron (CVX, 163.85) gained 7.95 points (5.10%), and ExxonMobil (XOM, 125.36) added 2.71 (+2.21%). The former, Chevron, is a Dow component. ExxonMobil is not. Gains on Chevron helped fuel (pun intended) the Dow Jones Industrial Average to a record close.
Perhaps a better way of saying that the stock market is unable to correct, is that the "market" is, and has been for some time, controlled by heavy-handed large institutions. BlackRock and Vanguard come immediately to mind. They are major holders of almost every stock listed on the Dow and the S&P. The NASDAQ, largely the province of technocratic oligarchs of the magnificent seven, has its own throttle, which has been kept wide open by the likes of Google, Amazon, Apple, Nvidia, et.al. Thus, the broad indices are routinely kept afloat by vested interests. A sudden collapse is out of the question. Even the possibility of a subtle decline seems remote in the current environment, though doubters remain.
This may seem a little far-fetched to some people, but to Dow Theorists, it is all that matters when it comes to determining primary market trends.
On November 25, 2024 the Dow Jones Transportation Average closed at an all-time high of 17,754.38. On Monday, January 5, 2026, the average closed at 17,737.81. The "Trannies" have been inching closer to the all-time high since mid-December, but Monday's close was the first above 17,700. During the week of Christmas, the Transports closed above 17,635 four straight sessions, with the 25th a day off for the holiday.
Failing to break above the previous high, the transportation average continues to thwart the cheerleaders of the general rally, acting as a governor against the wide open throttle of the Dow Industrials. Dow Theory asserts that the Transports must confirm the rally in the Industrials by exceeding its own all-time highs. Otherwise, the primary trend remains unchanged, and bearish, the gains on the Dow - and, by extension, the S&P and NASDAQ - are all froth and no substance.
On the one hand, Dow Theorists may have a compelling argument, given the environment. On the flip side, suggesting that stocks may be a little overvalued seems to be impolite at least, imprudent at worst. Nobody wants to suffer the slings and arrows of denying the greatness of the United States economy or miss out on the spectacular profits from sitting idly by as markets swirl to ever great heights.
There may be more to defining the underpinnings of the market and general U.S. economy. Aligned with the Dow Theorists are goldbugs and silver stackers, the curmudgeons who complain about market interference in commodities and suppression of their precious metals. While most of them are probably diversified across asset classes, including stocks, they, taken as a nebulous group of malcontents, make the argument that not just stocks, but the U.S. dollar is vastly over-rated in terms of purchasing power and global dominance. They can rest their assumptions on inflation data and their own profits in gold, especially, and increasingly by the unruly advances in silver.
They certainly can make the case for hard assets over paper promises. Gold and silver are ripping higher this morning after solid sessions Monday. Stock futures are flat with the cash market opening within minutes. Whether their arguments for honest money ever come to fruition will be borne out by the very markets in which they trade and the realities of geo-politics and a burgeoning resource war.
For now, the jury remains out.
At the Close, Monday, January 5, 2026:
Dow: 48,977.18, +594.79 (+1.23%)
NASDAQ: 23,395.82, +160.19 (+0.69%)
S&P 500: 6,902.05, +43.58 (+0.64%)
NYSE Composite: 22,432.10, +198.21 (+0.89%)
Posts
No comments:
Post a Comment