Why is the DOW going up so high?

Question

I know some companies are doing good, they have done good in the past too.

Answer 1

The economy is doing great. Unemployment is down, inflation is low, the budget deficit is far lower than what was predicted, gas is low...in short people have condifence in the market. When that happens the market goes up.

Answer 2

Very good question. First, I don't know where Brutebish is getting the economy is so good. Unemployment down? There were 100,000 layoffs in Sept. Low inflation? The fed just said inflation is picking up faster than they anticipated? Yes, the budget deficit is lower than expected, but the trade deficit came in higher than expected. Gasoline is low, but I have my suspicions about that (more below). And let's not even get started about the housing market.

Okay, gasoline low. That sounds awfully suspicious to me. First, considering that an AP story reported that China in September had record oil imports. So, why is oil falling? Interestingly, in August, Goldman Sachs reweighted their Goldman Sachs Commodity Index (GSCI). The GSCI is the biggest of the commodity indices (it is to the commodity markets what the Dow is to the stock market). Many large institutional players benchmark their positions to the GSCI. Well, in August the Goldman reweighted the Unleaded Gasoline component of the GSCI. They reweighted unleaded gasoline from 8.72% down to 2.30%. This reweighting could have caused potential adverse delivery and settlement issues for the large institutional firms that were holding unleaded gasoline contracts. Thus this reweighting induced the institutional traders to sell billions of dollars of the September & October unleaded gasoline contracts which caused a sell off in the entire energy complex. Now, isn't in absolutely interesting that the timing of this reweighting affected the Sept. & Oct. contracts, just before the November elections? And need I remind you, the new Treasury Secretary, Henry Paulson was the CEO of Goldman before he took the Treasury job.

Also, take this into consideration, although the Dow is making new highs, the majority of the Dow components are not participating. Of the 30 Dow stocks, 21 of them (70%) are trading 20% or more BELOW their all time highs. Another trader pointed out that the advances in stock are not broad based, but are index led. In other words, only stocks that comprise the various indices are advancing, stocks that are not in the various indices are faltering. To sum up, the advance is very selective and is comprised of only the stocks that compose the various stock indices. During a true bull market, participation in the advance is very broad, not narrow like it is currently. Very interesting.

Add to that that the Long Open Interest positions on the 10 year treasury note is 6 Standard Deviations from the norm (12 Sigma). A 6 Sigma event has like a 1 in 500 million chance of occurrance, so a 12 Sigma event is exponentially even more rare. This long open interest position is interesting as that is a huge position that is virtually unheard of. And just to give you a heads up, bond prices vs. bond yields have an inverse relationship. As bond prices rise, bond yields fall. Thus, longer term interest rates have been falling.

Now, take a look at this, the market rallies on all news regardless of how bad it is. The Dow is up today by 70+ points on the news that McDonald's earnings would remain strong despite a slowing economy, yet the trade deficit is higher than expected, housing is slowing more, the fed has all but said "we won't be cutting interest rates, but we could raise them", the Institute for Supply Management said that manufacturing activity in the U.S. is falling, home builders across the nation are reporting significant drops in sales, new orders and significant increases in cancellations, etc. The bad news outweighs the good, yet the market shrugs it off as its' nothing.

If you ask me, I believe the powers that be are keeping the markets propped up until after the election. I have no conclusive proof, but with the perfect timing of Goldman readjusting the GSCI that prompted a sell off in the energy markets, the rally in stocks that has no solid foundation, huge open interest in the 10 year treasury notes as of recently which is driving longer term interest rates down. This is all too perfectly timed and all JUST BEFORE the midterm elections. There is a saying "Two times is a coincidence, three times is a conspiracy".

How much you want to bet that sometime after the elections, you will see the stock markets slide, energy prices go up and interest rates go up?

And if you want to further investigate, do a websearch on "Executive Order 12631". After the 1987 crash, Reagan issued EO 12631 establishing the Working Group on Financial Markets. If you look at the E.O. the purpose of the Working Group is to maintain investor confidence in the U.S. markets. But, it doesn't specify how. Just a quick note, in the financial arena, the Working Group has a nick name. It's call the "Plunge Protection Team". I believe they are using the vast resources of the U.S. government to prop up the U.S. financial markets. There can be no other explanation there is no fundamental data support the current market rally. Everything points to the fact the market should be falling.

Do your own research and see what kind of a conclusion you come to.

Answer 3

Some damn fool stuck the whold Dow thing on a roller coaster in the same seat as "inflation" and they are both stuck on "UP" and that's all it does--go "UP". It's so wierd nobody knows how to fix it. It just keeps going and going and going. Bush is too busy watching the death count in Iraq go up and up and up that he doesn't have time to deal with the Dow. Chaney could probably fix it but nobody knows where he is and Condi could possibly fix it too, but she's busy racking up frequentflyer miles and looking "black" for the administration to work on it and, let's be honest, Rumsfeld is just too damn stupid to be of any help. Anyway, He's too busy playing war games to care. "We're screwed--We're doomed".

Answer 4

The money have to flow somewhere.
With the hedge fund business controlled 1 Thrillion US dollars,
The hedge fund guys runnuing out of OIL betting, and the logically thing for them to bet is the big blue chip company( meaning betting the blue chip will weathered in the slow economy or recession)