Eye On the Market: A New Market High - Really?
By David O. England
CARTERVILLE, IL - Eye on the Market with David O. England - A new market high-Really?

With the Dow Industrials making a new all-time high I am taking a break from my series “What is moving the Market”, to answer your question, “Is the market really making an all-time high”? Once again, I will use non-biased data from the best chartist in the country Doug Short to illustrate my points.

It is true the Dow Industrials made a new all-time “nominal” high last week. This is a good thing when considering how many years many investors have been underwater. 
While the Dow Industrials made a new nominal high, the S&P 500 is still down .8% and the NASDA is still down -37.4%.

The problem with using nominal values, it does not reflect the true value in relation to inflation. The term nominal means current unadjusted value or number.  Per the chart, while the DOW Industrials is making a new all-time nominal high, the real DOW value is down 11.1% from the 2000 peak.  In addition, the S&P 500 is down 26.5% and the NASDAQ is down 53.6% from the previous high. These are the figures representing the true value of our money and what we need to be looking at instead of the “smoke and mirrors” (hype) from the Wall Street media.


Per the spreadsheet, you can see the nominal and real comparisons for each index from their 2000 peak.


 The charts are based on price but what about dividends? The next chart shows the results of investing $1,000 in the S&P 500 on March 24, 2000 in terms of nominal and real returns.  You can see for yourself the results. The total nominal return including reinvesting dividends (blue line) and the real total return adjusted for inflation, (red line) still remains negative.


So what does this mean?  First, new highs are not market tops. We had numerous new highs in the bull markets of the 60’s, 70’s, 80’s and 90’s.  Second, new highs do not always signal corrections. Third and most important, when Wall Street says “don’t worry, it will always come back”, you can see that although some indexes come back, looks CAN be deceiving.  In my classes and seminars I have taught my students the facts -- it is not being IN the market that is important, but WHAT and WHEN you are in that is.  This data proves my statement to be true.

Next week I will be wrapping up my “What IS really moving the market” series, you may be surprised with my conclusions. 

For questions or information about my upcoming classes and seminars contact me at

 (Disclaimer) The information above is for educational purposes only and is not intended to be financial advice. Your decision to buy, sell, short or hold any stock or investment product is a direct result of your own decision, free will and research.

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Published 08:09 AM, Saturday Mar. 09, 2013
Updated 08:18 AM, Saturday Mar. 09, 2013

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