Most of us that remember the 2000 peak remember the date – March 23, 2000. However, there is another peak that is not often recognized. The Industrials peaked on January 14, 2000 at 11750.20. 21.5 years ago last week. SPX also peaked on January 14, 2000 at 1473.00. The SPX subsequently peaked on March 23, 2000 as a one-day wonder at 1532.13, which the DJIA did not match at 11234.70. We are seeing interesting parallels here, with the DJIA first peaking on May 10, but making lower highs since then…until the final hour on Friday. 21.5 years is an important Cyclical juncture (4.3 X 5). The peak on July 16 at 35090.01 comes eerily close to a parallel match to the January-March 2000 peaks in the Industrials. That is why I have been banging the drum that a “slingshot move” may be imminent. The parallel got washed out in the final hour on Friday, but the turn is still imminent.
Two other points that may be mentioned. (1) The DJIA nearly tripled over that period of time (21.5 years). The compound annual rate of return was just a little under 5.25% during that period. (2) The 1987 trendline has given maximum resistance to the DJIA uptrend since 2018.
RealInvestmentAdvice comments, “Bulls Buy The Dip
Last week, we discussed that as the market hit new highs and the index returned to more extended and overbought conditions, a correction was likely. To wit:
“Analysts have set a very high bar for the markets to hurdle, given already lofty valuations. With indices already well-stretched above their historical means, there is much room for disappointment. With the currently very overbought short-term market, a 3% to 10% correction this summer remains likely.”
Well, between Friday and Monday, the market did sell-off by 3% to touch the 50-dma. However, at that point, “dip buyers” emerged to chase the market back to new highs. While this does indeed negate any short-term bearish action, it is worth noting two things (shown below):
- The volume of the rally was extremely light; and,
- The sell-off was too shallow to reverse the underlying technical concerns.”