This week (Monday – Thursday) the Dow Jones closed at new all-time highs, with Friday’s close being just a whisker from making it five in a row. Looking at the daily closes for the Dow Jones (Blue Plot below) with its 52Wk High Line (Green Plot), since late October of last year, they’ve almost overlaid each other.  

Twelve months is a long time for the Dow Jones to advance without seeing even a tiny 5% correction. The bulls are feeling pretty good right now, as if they’re ten feet tall and bullet proof. But the last time this happened in the chart below was in 2006-07, just before the Dow Jones slipped into its second deepest bear market since 1885. Is that what’s going to happen this time too?  I’m thinking it. That when the Dow Jones finally does see a decline of more than 5% or 10% from an all-time high, it’s going to roll over exactly as it did in late 2007.

Here’s the Dow Jones’ Bear’s Eye View (BEV) chart going back to 2013.  It’s not hard relating to what happen since 2013 above to what we’re seeing below, so take a moment to do exactly that. Since last April the Dow Jones has never closed more than 2.5% below an all-time high (BEV Zero below / Green Plot above).  

Also, in the BEV chart below, during 2013-14 it didn’t take long for the Dow Jones to correct down below its BEV -5% line, just a couple of weeks to maybe a month. Looking at the correction table in the BEV chart, from today’s lofty levels, the Dow Jones would have to shed a whopping 1,139 points to correct just 5%, twice that to see a 10% correction. That’s a lot of points to lose in a month during a 5% to 10% correction; people are going to notice that.  

With the Dow Jones approaching 23,000, concern of corrections isn’t causing the bulls to develop acrophobia. Maybe when the Dow Jones threatens to break below 20,000 it will be a different story.

Just keep in mind who the BIG bulls are in this market – central banks. These are institutions who have unlimited money to “invest” in the financial system, and so aren’t likely to fear any Dow Jones’ valuation threshold to the up or downside that someone like me would bring to their attention.  

However, what these central banks do fear is rising bond yields, and I have some comments below on that exact subject, specifically the pending massive problems in the muni-bond market. Currently, bond yields are behaving themselves (chart below), and as long as they do, I expect the stock market will continue to do much the same as it has for the past year; ditto for us long suffering investors in gold and silver.  

However, when the two plots seen in the chart below reverse themselves to the upside, as one day they must, all this will change. The Dow Jones will break down over 10% from an all-time high, and we’ll see what happens then. That plus gold and silver will once again see some action to the upside that will make the wait we’ve endured since 2011, all worthwhile.

But in early October 2017, as the Dow Jones step sum chart below shows, we’re not there just yet. The overwhelming number of daily advances (rising step sum / red plot) is impacting the Dow Jones. We may be seeing the beginning of a historic feeding frenzy in the stock market. If this continues, don’t be surprised should the Dow Jones finds itself a good way above 23,000 by the close of next Friday, and then maybe even above 24,000 in the weeks to follow.

It’s not just the Dow Jones advancing. The other 21 major indexes I follow are at or near their all-time highs, except for the NYSE Financial Index (#22 in table below).  

The banks are another problem that could cause big problems for the “policy makers.”  As of October 2017, they’ve yet to recover to their pre-credit crisis highs because they’re still corporate entities who have massive problems on their balance sheets.

I’m not an accountant, so my opinion on this or that bank’s financial situation is just that, my opinion. But what isn’t my opinion is that the big Wall Street banks have played fast and loose for decades, safe in the knowledge that their friends in Washington would always come to their rescue when they found themselves in a crisis.  

Nothing has changed since March 2009, except it’s likely these banks’ financial situations have degraded to a point where come the next crisis, even the US government will be unable to save them. That could result in a breakdown of the global payment system, where cash withdrawals from a bank or their ATM, and the option of using plastic for financial transactions (for food or gas and everything else) would no longer be available. This is something that didn’t even happen during the Great Depression.  That can’t be good.