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| "TUESDAY" production sign (Photo credit: Vaguely Artistic) |
Strong housing data drove stocks at the opening. The March Case-Shiller 20-city Home Price Index rose 10.9% versus an expected 10.1%. And the consumer confidence index for May jumped to a five-year high at 76.2 versus an expected reading of 72.
At Tuesday’s close, the Dow Jones Industrial Average was up 106 points at 15,409, the S&P 500 rose 10 points to 1,660, and the Nasdaq rose 30 points to 3,489. The NYSE traded 733 million shares and the Nasdaq crossed 435 million. Advancers led decliners on the Big Board by 1.4-to-1, and on the Nasdaq, advancers were ahead by 2.4-to-1.
The S&P 500 not only held at its near-term support at 1,635-1,650, but advanced from it. And the Dow industrials set another record intraday and closing high.
As the major indices were hitting new highs, the Dow Jones Utility Average plunged almost to an official correction.
And the 10-year Treasury note (see yesterday’s chart) jumped to 2.1%, the biggest one-day gain in 50 years. There is finally a rush, though with relatively light volume, into equities from debt as market appreciation is being recognized as providing a higher return than bonds and defensive stocks.
Long-term base breakouts are rare. Since 1900, there have been four bases that exceeded 12 years: 1906-1924 (18 years), 1929-1955 (26 years), 1966-1982 (16 years), and 2000-2013 (13 years). And each period had the following characteristics:
1. A rebound from high unemployment (age 20-35)
2. High government interest payments on debt
3. Low investor allocation to equities
4. Extremely high/low interest rates
2. High government interest payments on debt
3. Low investor allocation to equities
4. Extremely high/low interest rates
Conclusion: It appears that institutional investors are finally moving from the safety of bonds and higher yielding, defensive stocks, like utilities and big caps, to more aggressive investments.
There is no questioning the Dow industrials long-term breakout. A friend provided the above chart of the results of other long-term breakouts. There were just four in the past 100-plus years, and each led to mega-return bull markets.
The message is clear: A major new bull market is under way, and like all others, it is being met with disbelief and even anger. Prices may consolidate over the summer, but investors who continue to hesitate, waiting for a “correction,” could miss the biggest stock market advance in their lifetime....
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