Dow - More new records next week ?

On Friday, Dow managed to recoup all its Thursday losses, gained 167 points (1%), to closed the week at a new record high of 15,761.

I am looking for Dow to break its upper trend line next week to have a 3 to 4 weeks run to complete its mini wave 3 of sub-wave iii of wave (ix).

It is good that many gurus are warning about  the assets bubble. It is also good that many investment funds are very cautious and holding sizable amount of cash. In the past, market usually end after a euphoric run-up. The last surge can be very juicy.

But, I will have to remind myself that this is an assets bubble and with the on-going money printing by the central bankers, the bubble is getting bigger each day. It will definitely burst one day, the question is when ?

In December 1996, while dot-com bubble was being formed, Alan Greenspan made his famous 'irrational exuberance' speech, warning that the market might be somewhat overvalued when Nasdaq was around 1300 level.

 From 1992 to December 1996, Nasdaq moved 

from 523 level to 1300 for a 150% gain.  

This is what Greenspan said in his speech,

"Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?"

For his full speech click 'The Challenge of Central Banking in a Democratic Society'. 


It is interesting to look at Nasdaq after December 1966.

Nasdaq has an euphoric run for another 38 months to 5048 level for another 288% gain before dot-com bubble finally collapsed in March 2000.

If one got out of the market after Greenspan's speech and even if he was able to get in again right at the bottom, he saved himself 14% but he had missed out the 288% gain in 38 months.  It is definitely very agonizing for many people, standing at the sideline doing nothing for 38 months, just watching the index moving from 1300 to 5048.

.