Forget Dow 20,000… This Indicator Tells the Real Story

caseyresearch.com / Justin Spittler / January 26, 2017

It finally happened…

For the last six weeks, the Dow Jones Industrial Average has been bumping against a ceiling.

Yesterday, it broke through. The Dow topped 20,000 for the first time ever.

Most investors are excited about this. After all, 20,000 is a big, round number. It feels like a psychological win for the bulls.

But it’s not an invitation to dive into stocks…not yet, at least.

We need to see if the Dow can hold this level.

If it closes the week above 20,000, stocks could keep rallying.

If it doesn’t, nothing has really changed. It could even be a warning sign.

Until then, sit tight. Don’t chase stocks higher…stick to your stop losses…and hold on to your gold.

• Don’t lose sight of the big picture, either…

Remember, U.S. stocks are still very risky:

➢ They’re expensive. The S&P 500 is trading at a cyclically adjusted price-to-earnings ratio (CAPE) of 28.4. That means large U.S. stocks are 70% more expensive than their historical average.

➢ We’re still in a profits recession. Profits for companies in the S&P 500 stopped growing in 2014.

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