With four back-to-back all-time nominal highs in the Dow Jones Industrial Average (DJINDICES:^DJI) last week, the Dow's broader, better-constructed counterpart, the S&P 500 (SNPINDEX:^GSPC) must be starting to feel a bit sheepish. Indeed, it remained unable to break its Oct. 2007 high today, despite gaining 0.3% on the day. That milestone can't be far ahead, however, with the mark now less than six-tenths of a percentage point away. Given the recent consistency of daily stock market gains, we might expect to hit it within the next two to three days.
Speaking of which, have you noticed that stocks have risen every day so far this month? That's a seven-day winning streak, and should the S&P 500 manage to finish in the black tomorrow, that would produce us our second eight-day winning streak since... January. Prior to that, one has to go back to more than eight years, to Nov. 2006, in order to find one. That looks like an anomaly to me, but one must be careful in examining a long number series with a heavy randomness. However, there are other observations that look a bit odd, too.
To wit, where stock indexes have been on an relentless upward march, the VIX Index (VOLATILITYINDICES:^VIX), Wall Street's fear gauge, has been driven down systematically. Today, the index lost another 8%, closing at 11.56 -- the last time it closed there was on Dec. 29, 2006. We are beginning to plumb the depths of the index's historical range; for reference, 11.52 is the threshold value for the bottom 5% of values going back to the VIX's inception in Jan. 1990 (the VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days).
"Rigged" is a loaded term, which I chose purposefully, mainly for its shock value. Nevertheless, faithful readers of this column will recognize a theme of mine: This market is not, for lack of a better word, "normal." Furthermore, the "Bernanke put," by its nature, is a source of anomalies and distortions. I think it's possible that the phenomena I have described above are manifestations of this. The conclusion is clear and I must repeat it like a mantra: Avoid leverage, stay focused on long-term, fundamental value, and don't get lulled into thinking the "up" days will never end.