Congratulations bull markets fans!

Today stock markets all around the world broke into record high ground. In the United States, United Kingdom, Germany, and Sweden: the main stock market indexes hit their highest levels. Ever Japan closed at its best point since 2000 and most other European markets such as France, Belgium, Ireland and the Netherlands are at their highest levels since 2008, which was before the financial crisis. What’s all the euphoria about? European central banks are poised to start a stimulus program and the cloud hanging over Greece has been pushed back by four months. Also Federal Reserve chairman Janet Yellin sounded mostly optimistic about the economy in her testimony before Congress today. “Our confidence has improved. When we raise rates, it will be a signal of confidence” she said. Investors interpreted these statements at the Senate Banking Committee, as a sign that rates will not go up until June at the earliest. Janet Yellin also said “we have seen a significant increase in the share of the pie of GDP go to capital as opposed to labor. The translation means; that Corporate America is gaining a lot more from the economy recovery than the average American. She also said “too many Americans remain unemployed or underemployed, while wage growth is still sluggish and inflation remains well below our long-term objective.” She did not propose a solution.

Rather than just complain, I thought I would talk for a while about a solution of income inequality and tax fairness. A recent report by the nonpartisan Institute on Taxation and Economic Policy, said that the poorest 20% of households Americans pay on average about twice the effective state rate tax rate 10.9%, as the richest 1% of taxpayers 5.4%. If the tax laws were changed to compel the highest income earners to pay the same rate as everyone else, states and local governments would raise up to $125 billion a year in new revenue. If the top 1% of earners were also compelled to pay the typical middle-class tax rate, the report says the change would raise more than $68 billion in new annual revenue. This could help solve a lot of our progressive budget problems. For instance it would only cost about $6 billion a year for Obama’s community college proposal and universal pre-kindergarten in all states would cost roughly 24 billion anually. Similarly, the report notes that the total annual price tag of back filing public pension shortfalls is about 30.5 billion. It would also cost about another 30 billion to repair our crumbling roads and bridges. The report found that five states would reap the most revenue from equalizing tax rates: Texas, Florida, Pennsylvania, Massachusetts and Ohio and are among those with the largest pension shortfalls. Many Republican lawmakers are championing proposals for new state tax cuts, some of which could further widen the gap between the rates paid by the rich and the poor. Despite the issues of finding tax fairness, the report is likely to have no effect in many state legislatures as tax adverse Republicans increase their power and most of the nation’s statehouses. The National Conference of State Legislatures reported that the GOP now controls more than 55% of the counties 7383 legislative seats. The facts about tax fairness are certainly compelling. The numbers prove that the system could be once more equal and raise more resources for public priorities. But these numbers can only become a reality if there is a serious political counterweight to the GOP proposals, and that appears to be a big if.

Warnings of a slowdown in Europe, China and South America and ongoing conflicts between Russia and the Ukraine and problems in parts of the Middle East are being ignored. There are still plenty of warning signs that the stock market can’t keep this pace going. Nobel prize-winning economist Robert Shiller has noted that his metric to measure how expensive US stocks are, the Shiller P/E10   index, is back to levels not seen since the financial crisis. The P/E ratio for the Dow Industrial s is at about 17, whereas the P/E ratio for the NASDAQ is at about 30. All of these P/E ratios are high, but are not necessarily excessive. HOWEVER THE PERCENTAGE OF THE MARKET ABOVE REGRESSION IS 91% ( that is very high) AND 39% ABOVE REGRESSION OF THE SHILLER P/E 10 ( well within the 5th Quintile)!  So bulls, enjoy your glory while it lasts.

Current	Dow	NASDAQ	S&P 500
	18,209	4,968	2,115
Short Term	UP	UP	UP
Int. Term	UP	UP	UP
Long Term	UP	UP	UP
ForecastedTrendd	DJIA	NASDAQ	S&P 500
Short Term	Down	Down	Down
Int. Term	?	?	?
Long Term	Sideways?	Sideways?	Sideways?
Breakout Points	DJIA	NASDAQ	S&P 500
Short Term Up (Resistance)	18,209	4,968	2,115
Short Term Down (Support)	17,147/17,0000	4605/4,5455	1,991/1,9733
Int. Term Up (Resistance)	18,974 See Fibonacci Projections above	5,002 See Fibonacci Projections above	2,486 See Fibonacci Projections above
Int. Term Down (Support)	15,855         /15,356 /14,688	4,166 3,986/3294	1,820 /1,560
Long Term Up (Resistance)	18,974	5,132	3,044
Long Term Down Fibonacci Support	50%12,000  62% 10,750	50%2,958  62% 2,555	50%1,390 62% 1,177
10 yr Treasury 1.99	Gold 1,207	Oil 49.33