Dow theory

I also agree that we are closer to the end than the beginning. However, I don't think all of us are bullish - well some are definitely much more bullish than the public but there are others - such as rffrydr - that are somewhat bearish and also raise very good points at the same time.

For me, the divergences are now starting to become a concern, although they are still somewhat muted, given that:

1) I had been expecting large gap outperformance for a long time, so a month or so of divergences (where the DJIA and the S&P 500 out performs everything else by a significant margin) is not too much of a concern to me. Of course, this doesn't mean that I cannot try to do so some "tactical" adjustment and trim down our 100% long position in our DJIA Timing System

2) Valuations are not too stretched - either from a P/E or a Fed model standpoint. One may say there is not too much of a difference between a P/E of 18 or 20, but to me, that is more another 160 point runup in the S&P or a further 1,500 point runup in the DJIA.

3) There is still a lot of potential buying power on the side. The best evidence is the huge chunk of change sitting in the balance sheets of private equity firms. ISI just completed a study and argued that there is sufficient buying power for private equity investors to take over 50% of the S&P 500 corporations. Because of this private equity "threat," many corporations are now also hurriedly buying back their own stock (not that they were not doing this before) - as exemplfied by the $15 billion promised buyback of IBM.

Once investors catch on to point number 3), then it will be time to start selling - but for now, until the Barnes Index rises to over 70, I think I will stand pat for now.