Friday, December 24, 2010

Why "The Dow Is Up" Might Not Be Good News

Gotta love Ritholtz. He posts good contrarian stuff.

The MSM has embarked upon an "it's getting better" meme about the economy. One of the frequently-mentioned 'positives' is the DJIA's recent runup. While a number of economic indicators are positive, using the Dow as support for 'revival' has its flaws.

So Ritholtz quotes David Rosenberg:

In Barron’s look-ahead piece, not one strategist sees the prospect for a market decline. This is called group-think.

...Investors Intelligence now shows the bull share heading up to 58.8% from 55.8% a week ago [...] a new high for the year and is now the highest since 2007 ― just ahead of the market slide

...It may pay to have a look at Dow 1929-1949 analog lined up with January 2000. We are getting very close to the May 1940 sell-off when Germany invaded France

...From a historical standpoint, the yield on the S&P 500 is very low ― too low, in fact

Be careful out there!

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