Russell: “In the 56 years I've been writing Dow Theory Letters, I can't remember a more difficult or puzzling situation than the one we now face. Yet, day after day drifts by and the stock market holds fiercely together. … The dividend yield on the S&P Composite is now a micro 1.98%. At the same time the margin account on the NYSE is at a record high. The Dow and the S&P are both at record highs, and at the same time the VIX is near record lows. Thus complacency reigns in the face of a market that is near record levels of overvaluation.
This is a stock market that is not ready for any negativity or bearish developments. In the meantime, John Williams of Shadow Statistics warns that the government, in its desperation to paint an optimistic picture on the economy, is putting out phony or doctored information.
Volatility ended the week at a low 10.32, indicating extreme complacency. Last week the Dow Industrials and the
S&P Composite closed at record highs, with the Dow closing over 17,000 for the first time in history. The NASDAQ closed at its highest level in 14 years. The dividend yield on the S&P Composite ended the week on a never-before-seen micro low of 1.98%.
This compares with the yield on the ten-year Treasury bond of 2.62%. Historically, the dividend yield on stocks has almost always been above bond yields. So it seems that the stock market, with its incredible foresight, sees nothing but blue skies ahead, and the record high in NYSE margin debt provides evidence that traders are bullish and enthusiastic.