Two of the three major US indices including the S&P 500 and the NASDAQ closed at all-time new highs yesterday.  However, the new all-time highs being an indicator that the 2009 secular bull is still alive and that the indices will continue on to newer all-time highs is suspect.  It’s because of the following:

  • The Dow Jones 30 Industrials composite remains 500 points or 2% below its all-time high.
  • Yesterday’s volume for the S&P 500 was the lowest since the day before last Thanksgiving.
  • The highs could have been generated by short covering. Some investors including some short funds automatically cover shorts when an index reaches a new all-time high.  Additionally, the short positions against the FAANG (Facebook, Apple, Amazon, Netflix and Google) increased by more than 40% over the last year.  Bearish investors are short an aggregate of $37 billion of the shares of the five members of the group.  Two of the five, Apple and Amazon closed at all-time new highs yesterday.

The markets have a history of hitting new highs at the end of a summer.  The high for 1929 was September 1, 1929.