What the Dow Rally Really Means

The stock market has gone on quite a tear since the election of Donald Trump.

In fact, the Dow Jones Industrial Average has now registered a new, all-time high thirteen times since the election.

You read that right: 13 new highs in just over a month!

And while I expected the move higher, the strength of the upswing is NOT what you think it is.

Yes, I’ve been saying for some time now that the surge in capital flows would push U.S equities higher, sending the Dow to 31,000 or higher in the years to come.

And this recent surge has confirmed the trend higher, hitting my monthly buy signal after closing above 18,500 last month.

BUT, that does NOT mean a correction can’t come before blasting higher again. A pullback, possibly a very sharp, drawn-out one, is still way overdue. Chief reason: Just five stocks have accounted for over 60 percent of the move.

About two-thirds of the rally in the Dow can be attributed to five companies.
About two-thirds of the rally in the Dow can be attributed to five companies.

That’s right, about two-thirds of the rally in the Dow can be attributed to five companies: Goldman Sachs Group Inc. (GS), UnitedHealth Group Inc. (UNH), JP Morgan Chase & Co. (JPM), Caterpillar Inc. (CAT), and Boeing Co. (BA).

But, one company has stood above the rest during this post-election rally: Goldman Sachs.

In fact, the investment firm has been responsible for a huge amount of the increase in that index — a mind-boggling 30 percent of the recent gains. The other four stocks combined make up the other 30 percent.

Still, for investors even thinking about chasing these high-flyers, keep this in mind: When the rally backs up some — which I believe it will — these five will likely get hit the hardest.

And while market breadth — or the number of stocks advancing compared to those declining — is improving, it’s still not what I’d like to see for a rally of this magnitude.

So, although the Dow closed above my monthly buy signal — and continues rising to new highs — that does not prevent another sudden move to the downside, one which could last days, weeks, or even months.

A pullback — even a very sharp one — is way overdue.

Now is NOT the time to jump in with both feet. But when the time is right, my members will be the first to know.

Best wishes,

Larry

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader. Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

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Comments 15

Jim moses December 12, 2016

When will be a good time to buy golds stocks . I keep hearing now then I'm hearing short them???

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Dan S December 12, 2016

Larry, I've heard for over a year how the commodities markets are way overvalued and yet again the markets rally to record highs. All this happening whiles the national debt is increasing at an exponential rate. This to me makes absolutely no sense what so ever. It appears to me this is not individuals or companies playing the market rather Central Banks purchasing stocks to manipulate the market to record highs. I can see this being done for only one reason and that is protect all of the retirement accounts pegged to stocks. If this is the case, it is plain and simple market manipulation and should be illegal. What do you think?

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Baron Anaya December 12, 2016

I just don t understand why the syovk exchange keeps overpriceing stocks just to pay dividends to there clients . No wonder we keep going tjrpugh the same bailouts somce the saveings and loans . And wjat a way by programing events long before they get ready to do do another bailout. Just like they,ve been trying to do with Social Security, borrowing money from its and the onlyveay they can het away from repaying it is by do awsy with it alltogether. Whats going to happen to all the people tjat paid into it and they don t get Social security anymore they're only sorce of income gone . What a bunch of crooks . They should all be prosecuted . They should be all be held libable and make them pay every cent. The system is broke and needs to be fixed. I WISH I COULD BE THE ACCOUNT SO I COULD SEE WHERE ALL THE FINDS ARE SPENT AND DO LIKE THE POST OFFICE DID BACK IN THE 90IES WHEN HAD A GUY CALLED TJE SLACHER WHO DONWSIZED THE WORK FORCE.

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Mike December 12, 2016

Let me know

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juan December 12, 2016

I do not invest or study stocks market trend (different that reading Money and Markets frequently). With all that ignorance announced, it can also happen that the other 495 of the 500 make some improvement -and begin balancing the grow-; if the market/economic conditions justify it. If not, those 495, plus these 5 will fall down. I incline for the first, juan

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Crispy December 12, 2016

Might be a good time to start shorting these five stocks??

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denny parks December 12, 2016

for someone that has never bought a stock,where would you recommend going ????

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Rob Young December 12, 2016

What will cause GOLD to skyrocket?

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Stephen Flores December 12, 2016

Larry I am a rookie in the stock market. I know NOTHING!! I invested 8 thousand dollars since I joined your service and have made 3 thousand profit. I have moved my most of my money out except fotr the profit. Now I want to reinvest & I need advice on where to invest.

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Joseph Appiah-Adjei December 12, 2016

The recent trend suggest the Dow is heading towards record high in the next few years ?

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Julianna December 12, 2016

Dear Larry, I read and highly value all your newsletters, opinions, predictions for years. I'm ready to rollover two annuities account. I know timing is everything, therefore would you suggest to do it now, or wait until January. Also, I would like to try your membership program. Would you be kind enough to tell me which paid program,( since Weiss Research, Inc. offer so many) would be beneficial for someone, who managing investments for years, but don't know when and what to buy and sell. You are the only person I have trust and confidence in and like to do business with directly, is it possible ? Best Regards, Julianna H.

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Eli December 13, 2016

90% of the research shows that charting doesn't work. Strange theories of multiples of the Dow to gold don't work. You have to invest with the fundamentals. I took one piece of advice based on charting and sold my oil shares at a loss 2 months ago. Now they're all up, and long term, the trend is up because the world is running out of oil, and investment in new production was cut when the price fell.

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H. Craig Bradley December 13, 2016

FINANCIALS WILL DRIVE MARKET VOLATILITY Financials are a bad bet for mom and pop retail investors. Institutions piled-in, looking to beef-up their year end performance. Its a mania for them. Don't let it be one for you. When they sell, they all sell at once. All-in, then All-out means uber volatility next year for everyone. Financials will pull down the entire stock market once again. So beware.

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Kevin O December 14, 2016

We've been on the brink of another crash for a while now with one thing missing that is common before most trigger. That is euphoria. Are we there?

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nitram December 17, 2016

Interesting that platinum is 10x rarer than gold yet selling at a discount to gold if you can find any. PPLT http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=PPLT&insttype=Fund&freq=2&show=&time=20

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