Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Dow 15,000, 16,000 by Friday?

Stock-Markets / Stock Markets 2013 May 08, 2013 - 12:28 PM GMT

By: Money_Morning

Stock-Markets

Shah Gilani writes: The Dow Jones Industrial Average, the world's most famous stock index benchmark, easily smashed through 15,000 yesterday, reaching a new record high of 15,056.20.

Excited stock market bulls think the Dow's march to 16,000 won't take nearly as long.


They've got good reason to think that.

While it took the Dow seven years and five months to go from 11,000 on May 3, 1999 to 12,000 on October 19, 2006; it took only six months to then go from 12,000 to 13,000 on April 25, 2007; and only three months to jump another 1,000 points to over 14,000 on July 17, 2007.

It's taken the Dow four years and just over nine months to decisively rise above 15,000.

What's even more remarkable than the Dow possibly making it to 16,000 before long, is that the Dow had sunk to 6,547.05 on March 9, 2009. It's risen 8,509.15 points in only three years and two months.

What's behind the market reaching this milestone, and will it be easy to add another few thousand points in the months ahead?

A Harbinger of What?

The short answer is: don't bet against it. But, don't bet the house on it, either.

First, here are two absolute simple basics why the average can go a lot higher.

Number one: There are more buyers than sellers.

Waves of capital have been flooding back into stocks. According to the Investment Company Institute, which surveys at least 95% of all U.S. domiciled mutual fund families, year-to-date (ending April 3, 2013) equity fund flow trends are the best in five years.

The domestic stock category alone took in over $21 billion through early April. For the week ending Wednesday, April 24, 2013 estimated inflows to long-term mutual funds were $8.42 billion.
Hybrid funds that invest in stocks and fixed income securities had estimated inflows of $1.36 billion. And surprisingly, amid the rising stock market propelled higher by inflows, bonds rose alongside stocks with bond funds seeing estimated inflows of $5.76 billion over the same one-week period.

Number two: There are fewer companies to buy.

According to Wilshire Associates, keepers of the Wilshire 5000 broad-based stock index, there were 6,639 U.S.-based operating companies listed on U.S. exchanges in the year 2000. There were 4,989 in 2004; 4,539 in 2008; and only 3,687 in 2012.

For perspective, there were 3,069 in February1971 and a high of 7,562 in July 1998.

Leveraged buyouts, mergers and acquisitions, companies being delisted and a dearth of initial public offerings have reduced the number of companies available to invest in.

While big companies have gotten exceedingly bigger and float more shares, fewer companies traded on U.S. exchanges makes diversifying harder. At the same time, bigger and bigger institutional money managers seek out the biggest companies with the most shares outstanding to invest in, so they have enough liquidity getting in as they hope to have when they want to sell shares.

From the so-called 30,000 foot-high vantage point, more money chasing fewer companies is a respectable recipe for a rising stock market.

There's plenty more ammunition out there. The Great Rotation, the dumping of low-yielding bonds and their rush into higher dividend-paying equities with the potential for capital appreciation hasn't even begun yet.

There are trillions of dollars parked in bonds, that if moved into equities could make 16,000 happen in the blink of an eye, and 17,000 and higher all too easy to accomplish.

Of the Straw and the Camel's Back

Of course there's plenty that can go wrong. Just because we've gotten past the fiscal cliff and sequestration hasn't yet been a four-letter word, and Europe has been dusting itself off, and China is still in the business of eating the world's lunch, doesn't mean there aren't rats in the woodpile.

We should keep an eye on the market's price earnings ratio, which is now higher than its historical norm. We should keep an eye on mechanical issues, like increasing incidents of mini flash crashes that are warning us there are ghosts in the machine.

But, as long as earnings keep rising and the sun sets in the West, and the big picture is the story about more money chasing fewer shares, the market should keep rising.

Will we see 16,000 before Friday? Maybe. But before we get too ahead of ourselves, don't forget the Dow was above 14,000 in 2007 and fell to below 6,500 in March 2009.

Just keep raising your stop-loss orders as you watch your stocks go higher and higher.

Source :http://moneymorning.com/2013/05/08/dow-15000-16000-by-friday/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in