Date: April 12, 2018

All Time Highs on Tap. A Few Key Prices to Watch

Let me begin by answering a few emails after my last couple of updates. Yes! I continue to believe that fresh all-time highs are ahead for stocks with the Dow hitting at least 27,000 in spite of the increase in pundits calling for the end of the bull market. Stocks seem to be in the second half of the bottoming process, regardless of whether we see Dow 23,000 or a move above 24,700.

The major stock indices continue to thrash around without making much progress up or down. While this is not typical of the bottoming process, large day to day swings can often frustrate bulls and bears and lead to a reversal. In this case, that would be higher.

A quick look at the five major indices yields the following price levels that I want to see closed above for a little more comfort.

Dow 24,700

S&P 500 2675

S&P 400 1900

Russell 2000 – already higher

NASDAQ 100 6800

All of these levels are only one strong day away. Additionally, since we have seen three days where 90% of the volume (number of shares traded) has been in stocks going down, I also want to see at least three days with 80% of the volume coming in stocks going up. 90% would be even better, but I am not holding my breath.

One other piece of outside the box data comes from the media requesting my comment or appearance. It’s hardly scientific and I don’t have all of the data points in a tidy spreadsheet. However, whenever I get a cluster of requests, stocks have traditionally been very, very close to a low or high. The more requests, the stronger the low. I kind of view it as volatile markets lead to more coverage and when they run out of their usual smart folks and the others, they get to me. Two weeks ago at Dow 24,000 I had 6 requests in a short amount of time. Hmmmmm…

Tomorrow, I will move on to sectors and junk bonds where the evidence isn’t as compelling as in the major stock market indices.

It feels like spring today, for the first time. Upper 50s and sun. I see the driving range in my plans. Tomorrow and Saturday, they say 70s. And then back to the 40s. You know what Mark Twain said about weather in New England? “just wait a few minutes”…


Paul Schatz, President, Heritage Capital