Over! The! Top! Dow Surges 228 Points As S&P Has Best Start Since 2003

That's the best first nine trading days of the year since 2003, when the S&P 500 gained 5.9%, notes

Bespoke Investment Group. The big difference though is that in 2003, the S&P 500 was just exiting the "nasty Dot Com bust bear market

it bounced to start the year." That rally, however, was quickly followed by a 12% drop as investors worried about the Iraq War. When the bear-market low held, it was off to the races. This time, the rally is coming in the ninth year of the bull market, Bespoke says. "The environment couldn’t be more different."

So let's just come out an say it: The stock market is overbought. But

Wellington Shield's Frank Gretz notes that there's "good" and "bad" overboughts. The bad ones occur when the market is trading in a range, and the overbought condition signals, perhaps, a decline back to the bottom. But "good overboughts" occur when the market just keeps moving higher. Gretz notes that the percentage of stocks trading above their 10-day moving average, a measure of whether the market is overbought or oversold, normally fluctuates between 20% and 80%, but hasn't been near 20% since August. "The market becomes overbought and just stays there," Gretz says. "Strong markets stay strong.

What could derail the market? It's hard to guess. In a column last weekend, I worried that bank earnings would be messy because of the uncertainty around taxes, but there didn't seem to be much messiness in the reaction to results.

JPMorgan Chase (JPM) gained 1.7% to $112.67 after beating earnings forecasts, while

Blackrock (BLK) climbed 3.3% to $555.53 following its own results. Only

Wells Fargo (WFC) finished lower because its, well, Wells Fargo. It dropped 0.7% to $62.55.

Higher rates aren't as worrisome as they were earlier this week. Wednesday's Treasury rally caused a small drop that ended the S&P 500's string of new highs to start the year at six, but stocks soared to new highs today even as the two-year Treasury yield topped 2% to close at its highest level since 2008. That's a sign that today's 0.3% rise month-over-month in the core consumer price index was enough to keep the Fed on its hiking path. But the market's rise suggests that the Fed won't be hiking enough to shock the market.

Let's hope it's right.

Source : https://www.barrons.com/articles/over-the-top-dow-surges-228-points-as-s-p-has-best-start-since-2003-1515801547

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