Breakout

100-Point Dow Swings Are Back

Breakout

For the seventh time in the past ten sessions, the Dow Jones Industrial Average (^DJI) is moving at least 100 points, up or down, from the previous close. The cause of the volatility is hard to pin down since it is almost equally split between rallies and sell-offs, as well as domestic and foreign worries or hopes.

Today's early jitters appear to be pegged to the fact that the uber-easy Bank of Japan held pat and did not see the need to be even looser with their devaluation efforts. Fortunately, better-than-expected Small Business Confidence has tempered the disappointment, forcing investors once again to make a buy or sell decision on a twitchy market.

"I've been hearing concerns for the last 18 months as the market has made new highs," says Mark Lehmann, president and director of equities at JMP Securities, in the attached video. "I think they are valid, but in the absence of someplace better to put your money, the U.S. stock market is where you want to be."

Interestingly, since the S&P 500 (^GSPC) hit an all-time high of 1687 on May 22nd, there have been four failed attempt by stocks to end what has become a 3% downtrend, with the index establishing its fourth lower-high a widely acknowledged indication of a downtrend.

"Technical analysis would tell you that lower highs are not a good thing," Lehmann rebutts, adding his belief that we are in for a challenging summer with multiple attempts at setting new highs.

"I do think the tone of the market is better," he says, pointing to measures such as job creation, grinding economic growth, and the aforementioned fact that Small Business Confidence just hit a one-year high.

Even rising interest rates can't de-horn this bull. With the 10-year Treasury yield now at a 14-month high of 2.25%, (which is also higher than the 2.1% dividend yield of the S&P 500), Lehmann argues that while rates have definitely risen quickly in a short time, historically they are still extremely attractive and accommodative for business.

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