Dow Jones Industrial Average climbed last week as warning signs flashed The Dow Jones Industrial Average (DIA) and the S&P500 (SPY) posted gains for the week as Friday’s employment report exceeded expectations and Ukraine stayed on the back burner.
For the week, the Dow Jones Industrial Average (DIA) gained 0.8%, the SP500 (SPY) added 1% and the Nasdaq (QQQ) rose 0.7%.
The week was choppy as markets reacted to the situation in Ukraine and also hit new highs.
Economic reports were mostly positive as U.S. PMI registered 57.1 and exceeded expectations and initial jobless claims posted 323,000 versus expectations of 335,000 and last week’s 349,000.
February ISM was also well received at 53.2% compared to expected of 52.5% and last month’s 51.3%.
The big news of the week was the conflict with Russia in Ukraine and Russia’s stock market (RSX) fell approximately 12% for the week.
This coming week brings NFIB small business index on Tuesday, Thursday sees weekly jobless claims, February retail sales, and Friday reveals producer prices and University of Michigan consumer sentiment.
Other factors at work next week will be:
1. Ongoing concern over margin debt which is at record highs and which usually peaks near stock market highs.
2. The bull market’s fifth birthday last month which makes this a longer than average bull run.
3. New concern voiced by Dallas Federal Reserve President Richard Fisher, a new voting member and hawk, suggesting that the Fed needed to watch for stock market bubbles and new irrational exuberance.
4. Excessive valuations, now comparable to levels seen at the 2007 peak.
A quick glance at the chart of the Dow Jones Industrial Average reveals that the market is close to overbought levels and approaching significant resistance.
Bottom line: The Dow Jones Industrial Average (DIA) and other major indexes continue to climb while valuations and margin debt flash warnings.
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