On Friday, the Dow hit yet another one of our upside projections. This continues the longest stretch of successful upside targets since I started forecasting them 20 years ago. When the bear market ended in 2009 I remember being on CNBC with Larry Kudlow in early March thinking that stocks could bounce 1000 points before a possible retest of the lows could set up. People thought that was nuts. When stocks exceeded 8500 for five straight days, 10,500 became the next target and that was, of course, laughed at.
And here we are today. Dow 28,000. A target I offered on Fox Business, Yahoo and CNBC more times than I can count. Five straight closes above 28,000 will open 30,000 as the next target. I remember first discussing Dow 30,000 when stocks first breached 20,000 and people thought I was crazy. Interestingly, at this point, there isn’t another number above 30,000 to target. I am not sure what that means, but we will cross that bridge when we get there.
With Dow 28,000 I am seeing more people become bullish and a few cracks developing in the market with the number of stocks making new highs and new lows on the same day. Smart money is really increasing their level of quietly selling and dumb money is pouring into stocks. That’s usually not a recipe for good risk/reward and I am sticking with my neutral position in the very short-term. Simply put, that means I am not committing new money or raising risk until either stocks soften or the market internals improve. I am not calling for an end to this rally or the bull market or anything significant on the downside. Just your routine mild pullback or sideways action. I am, however, beginning to think about 2020, recession and how a bear market could develop.