DJIA Passes All Time High Again: Bull Market Or Bear Trap?

Our Dow Jones Industrial Average passed its all time high again yesterday, likely in response to the positive employment numbers released earlier yesterday morning. With the now new Dow record of 14,296.24, a .30% increase from Tuesday’s meteoric high, I wondered if this is indeed a new bull market or a a bear trap? I wrote an in depth article on this question.

In essence, I discuss all of the headwinds that the bulls (and bears) face: sequester affects, European recession, ailing US economic growth and unemployment, and the “QE forever” mantra of our beloved Chairman. Remember the last time we were at these levels, October 2007, and remember what happened shortly afterwards. Something to think about at the very least, and that is why Wall Street Sector Selector is still in yellow flag mode for the time being.

All that being said, the SPDR Dow Jones Industrial Average ETF (DIA) rose an additional .35%, as to be expected. The SPDR S&P 500 ETF (SPY) however finished flat again with a .14% increase, alongside the PowerShares QQQ Trust ETF (QQQ) losing .25% and the iShares Russell 2000 Index ETF (IWM) gaining .26%. I am curious about the performance of the S&P 500, NASDAQ, and Russell 2000 Index ETFs in light of the Dow’s field day(s), because the S&P 500 will most likely have to perform just as well as the Dow in the near future if a true bull in place. So, despite the meteoric highs, I am still skeptical of the bulls because of the current state of our other indexes and their respective ETFs.

But, we will find out soon enough what the trading gods have in store for us, so in the meantime, as of yesterday, investors were likely charged over the positive ADP Employment Report released in the morning, which indicated an increase of 198,000 new jobs for February, on top of 23,000 additional jobs added in January, a revised and positive number for January. Don’t hold your breath however, as the all important non-Farm Payrolls Report is scheduled for release this Friday.

Bottom Line: We are far from being out of the woods yet, as there are still too many economic and fundamental divergences to suggest a new bull market or a new bear trap. The yellow flag is still flying high.

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