I was in Las Vegas this past week for a bunch of meetings and conferences and I have to tell you there was a lot going on in that city.
There were traders and analysts at every hotel on the strip. It was really cool to see old friends and, of course, meet new ones. In between shooting videos of music greats, I personally found myself in a half dozen hotels arguing about markets.
It should come as no surprise by now what side of the debate I was on. No matter how much doom and gloom you hear, in reality, things are looking good for stocks.
After meandering sideways and going nowhere for 21-months, the U.S. stock market is starting to break out of that base. Consolidations tend to resolve in the direction of the underlying trend. In our current situation, if you look back to what came before this nearly two-year consolidation, 2016 and 2017 saw some of the greatest runs of all time.
A healthy consolidation, which is what we have just gone through, is perfectly normal. And now we’re resolving higher, which is also perfectly normal.
What seems a little abnormal is the amount of pessimism pervading this current environment. Some surveys show more bearish sentiment than the 2016 lows, 2008 lows, 2002 lows… And meanwhile, we’re making all-time highs!
But when people ask me what is going to take stocks higher, that’s exactly what I point to. The fact that no-one’s in this market right now, I think, is reason enough to think that we can see U.S. stocks go much, much higher than where they are now.
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The Dow Jones Industrial Average hitting 30,000 is perfectly reasonable by my work. I’m not just picking that as an arbitrary number either. We have targets clustering together near that level.
I’m not saying we can’t go higher. It’s just that I think we get there first, and then we can start talking Dow 40,000. In the meantime, from any sort of intermediate-term time horizon, this is a market we want to own if we’re above last year’s highs. That’s just what it is, and there’s still plenty of great opportunities to see some tremendous profits.
If the Dow is above 27,000, to not be long is just flat-out irresponsible. Same thing with S&P 500 at 3,000. We are going a lot higher, folks.
So what could derail this?
These are the signals that we will look for to see if we’re wrong about this:
- If Consumer Staples make new highs relative to the S&P 500, and
- we start to see deterioration in market breadth as opposed to the expansion we’re seeing, and
- Gold makes new highs, and
- Bonds make new highs…
If all of those things start happening, we’re probably really wrong about the stock market.
But we have to weigh the evidence. And right now, if the Dow is above 27,000 and you are not super, super long, you must be looking at the wrong data.