The stock market has gone on quite a tear since the election of Donald Trump.
In fact, the Dow Jones Industrial Average has now registered a new, all-time high thirteen times since the election.
You read that right: 13 new highs in just over a month!
And while I expected the move higher, the strength of the upswing is NOT what you think it is.
Yes, I’ve been saying for some time now that the surge in capital flows would push U.S equities higher, sending the Dow to 31,000 or higher in the years to come.
And this recent surge has confirmed the trend higher, hitting my monthly buy signal after closing above 18,500 last month.
BUT, that does NOT mean a correction can’t come before blasting higher again. A pullback, possibly a very sharp, drawn-out one, is still way overdue. Chief reason: Just five stocks have accounted for over 60 percent of the move.
That’s right, about two-thirds of the rally in the Dow can be attributed to five companies: Goldman Sachs Group Inc. (GS), UnitedHealth Group Inc. (UNH), JP Morgan Chase & Co. (JPM), Caterpillar Inc. (CAT), and Boeing Co. (BA).
But, one company has stood above the rest during this post-election rally: Goldman Sachs.
In fact, the investment firm has been responsible for a huge amount of the increase in that index — a mind-boggling 30 percent of the recent gains. The other four stocks combined make up the other 30 percent.
Still, for investors even thinking about chasing these high-flyers, keep this in mind: When the rally backs up some — which I believe it will — these five will likely get hit the hardest.
And while market breadth — or the number of stocks advancing compared to those declining — is improving, it’s still not what I’d like to see for a rally of this magnitude.
So, although the Dow closed above my monthly buy signal — and continues rising to new highs — that does not prevent another sudden move to the downside, one which could last days, weeks, or even months.
A pullback — even a very sharp one — is way overdue.
Now is NOT the time to jump in with both feet. But when the time is right, my members will be the first to know.