A lot of hullabaloo has been made of the stock market returning to record-high territory.
An August 26 Marketwatch headline captured the sentiment:
Why the stock market’s record-breaking rally has investors on the cusp of ‘euphoria’
Yes, the S&P 500 had fully erased the 34% plunge that began in February and bottomed on March 23.
Yet, as you may know, the rally has been driven by just a handful of big names. This brings to mind that famous stock market year of 1929.
The September Elliott Wave Theorist explains with the aid of a chart and commentary:
The advance-decline line topped early in the rise of the 1920s, then trended sideways through November 1928. Then it began to plummet. Yet the DJIA kept rising, on the strength of a few issues. Does that sound familiar? The Dow rose for nine full months while the a-d line crumbled. Then it topped on a spike and crashed.
The September Theorist goes on to discuss the parallel with the recent 2020 rally:
In recent days, the a-d figure has been negative even when one or more of the major averages has closed up on the day. This is 1929-type action. The a-d line, however, has not been in a steady state of multi-month decline. Must it replay the final months of the Roaring Twenties bull market before it reverses? One would think so… On the other hand, it has been nearly eight months since the secondary stock indexes topped out, and they are lagging the S&P and the NASDAQ indexes by a huge amount. Is that not the equivalent of a lagging a-d line? Some seven stocks account for huge percentages of the rises in the leading blue-chip averages.
The September Theorist published on August 31 and just three days later, this