Dow's Relentless Surge Shows Signs of Slowing Amid Overvaluation Risk
Hacked: Hacking Finance

Market Overview

Dow’s Relentless Surge Shows Signs of Slowing as Markets Ponder Overvaluation Risks

Posted on .

Dow’s Relentless Surge Shows Signs of Slowing as Markets Ponder Overvaluation Risks


This article was posted on Friday, 16:03, UTC.

The Dow Jones Industrial Average posted its seventh straight record close on Thursday. However, growth came by the narrowest of margins as Wall Street tempered its appetite for stocks.

// -- Discuss and ask questions in our community on Workplace. Don't have an account? Send Jonas Borchgrevink an email -- //

The Dow’s Remarkable Story

Earnings results from several blue-chips have pulled the Dow Jones into record territory. Gains continued on Thursday, with the index inching up less than one-tenth of a point to 22,026.10. That represents a year-to-date return of 11.5%.

But amid the euphoria are signals that the Dow may be approaching its top. Of course, very few of us recognize that the top has occurred until it’s too late. That was certainly the case during the last two financial crises.

Are We Nearing the Top?

Barron’s recently identified three eerie characteristics that have defined some of the biggest market tops in history.  They include overvaluation, a struggling financial sector and significant divergences.

// -- Become a yearly Platinum Member and save 69 USD and get access to our secret group on Workplace. Click here to change your current membership -- //

Overvaluation represents much more than how investors feel about a particular stock. Value indicators such as price/earnings, price-to-book and price-to-dividend ratios have done a pretty good job of signalling when the market is overvalued. While these indicators alone do not prove that the market has reached its tipping point, almost all tops in history have begun when these indicators became overvalued.

A struggling financial sector is also a precursor to a peak, as we saw in the post-1970 bull market and then again in 2007. When financials begin to sour, investors should seek refuge.

Significant divergences are another indicator of an unhealthy market that is about to peak. When divergence occurs, fewer stocks participate in the uptrend. This can only go on for so long until the market begins to buckle.

// -- Get exclusive consultation for as low as $249 per month on -- //

Based on this analysis, the Dow Jones may be approaching a market top, but isn’t there yet. Aside from overvaluation, there isn’t much evidence of divergence and even fewer indications that financials are about to crumble.

Attention Shifts to Politics

President Donald Trump, who many say is the chief catalyst behind the latest bull run, is looking keep the rally going indefinitely. Failing healthcare reform, the president is turning his attention to immigration and free-trade. The Trump administration has already put forward a plan to curb illegal immigration and boost the retention of skilled workers. Beginning Aug. 16, the administration will also embark on NAFTA renegotiation with Canada and Mexico.

While August is typically a slow month on Wall Street, political specter will provide plenty to talk about.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.

Feedback or Requests?

Sam Bourgi

Sam Bourgi

Sam Bourgi is Contributing Writer to, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.

  • user

    AUTHOR Finch

    Posted on 4:50 pm August 4, 2017.

    Very interesting, an example of a sign of divergence might be the recent split between the DJI and the Dow Transports.

  • View Comments (1) ...
    The team:
    Dmitriy Lavrov
    Dmitriy Lavrov is a professional trader, technical analyst and money manager with 10 years of trading experience. He covers Forex, Commodities and Cryptocurrencies. He is among the top 10 most Read More
    Jonas Borchgrevink
    Jonas Borchgrevink is the founder of and He is a serial entrepreneur, trader and investor. He shares his own personal journey on // -- Discuss and ask Read More
    P.H. Madore
    ICO Analyst
    P. H. Madore lives in Arkansas with his wife and children. He has covered the cryptocurrency beat over the course of hundreds of articles for Hacked’s sister site, CryptoCoinsNews, as Read More
    Mate Csar
    Trader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive Read More
    Justin O’Connell
    Justin O’Connell is a cryptocurrency journalist who works have appeared in the U.S.’s third largest weekly, the San Diego Reader & VICE. // -- Discuss and ask questions in our community Read More
    Mati Greenspan
    Senior Market Analyst at // -- Discuss and ask questions in our community on Workplace. Don't have an account? Send Jonas Borchgrevink an email -- // Important: Never invest Read More
    Rakesh Upadhyay
    Rakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use Read More
    Pamela Meropiali
    Account Manager
    Pamela Meropiali is responsible for users on // -- Discuss and ask questions in our community on Workplace. Don't have an account? Send Jonas Borchgrevink an email -- // Read More
    Joseph Young
    Joseph Young is a finance and tech journalist & analyst based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering Read More
    Friday Market Recap Asset Current Value Daily Change S&P 500…