Don't Take My Word For It

With the talking heads beginning their countdown of the DJIA nearing record highs, I thought I would elaborate on my conviction of a drop in the market.

Here is a chart of the personal savings rate as recorded by the U.S. Department of Commerce. Granted, we have had a negative savings rate since mid-2005, but one has to wonder how long this can continue without affecting the market.
http://bea.gov/briefrm/saving.htm

Here is a chart showing the rise of non-mortgage household debt. Does it bother anybody else that the rise is parabolic?
St.LouisFed.Org

Here is the outlook of consumer spending (in the context of the housing market) courtesy of Comstock Partners Inc.
Comstockfunds.com

There is also some interesting talk about the VIX and its relatively recent (2 year) correlation with the DJIA. I’ve created a chart to show the inverse relationship. If this association continues, the DJIA is getting ready for a drop.

If you don’t plan on buying SDS or DXD to hedge against a possible drop, I would at least pull some consumer discretionary stocks off the table.

Have a great week.