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As a contributor to the New Low Observer (http://www.newlowobserver.com/about-this-site), we intend to give new insights on a low risk approach to trading in dividend paying stocks for tax deferred accounts. The New Low Observer (http://www.newlowobserver.com/about-this-site) is not intended for... More
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  • Dow Theory: Dow 100,000? 2 comments
    Mar 14, 2013 1:10 PM | about stocks: DIA, IYT

    The world of Dow Theory was abuzz after the Dow Jones Industrial Average and the Dow Jones Transportation Average charged to all-time highs on March 5, 2013 (found here). At the time, the Dow Jones Industrial Average (DIA) had finally capitulated to the inexorable forces that had long since propelled the Dow Jones Transportation Average (IYT) above the 2011 all-time high. The confirmation of a Dow Theory bull market came when the Dow Jones Industrial Average finally exceeded the all-time high of 14,164 set in October 2007.

    The action of the Dow Industrials and Transports has been so compelling that Dow Theorist Richard Russell acquiesced to the strength of the market on March 11, 2013 by saying the following:

    "Yes, I know that this market is uncorrected during its long rise from the 2009 low, and I know that there are risks in buying an uncorrected advance that is becoming uncomfortably long in the tooth, but my suggestion is that my subscribers should take a chance (after all, Columbus took a chance) and take a position in the DIAs."

    In the same posting, Russell later punctuates the point by saying:

    "I really believe that subscribers should take a flyer on this market. After all, after weeks of flirting with a new high in the Industrial Average, the Dow finally confirmed the previous record high of the Transportation Average. With the Industrials and the Transports both in record high territory, I think being in the market is justified under Dow Theory."

    By all indications, this Dow Theory bull market indication is the real deal, especially when it is endorsed by Russell's 55 years of experience on the topic. The implications of this signal are significant for one very important reason, this time we've achieved a secular bull market indication (learn about cyclical and secular trends).

    Throughout stock market history, cyclical primary bull markets tend to last 2-4 years. These bull markets require rapt attention to the nuances and vagaries of changes in the trend. The last indication of a cyclical primary bull market was on July 23, 2009, when the Dow Industrials traded at 9,069.29. Based on our interpretation of Dow Theory, we received a cyclical primary bear market indication on August 2, 2011 when the Dow Jones Industrial Average was at 11,866.62.

    Secular bull markets, on the other hand, require very little attention and have typically lasted between 15 and 18 years. Secular bull markets are the proverbial sweet spot of investing with the trend, where "buy-and-hold" is the rule. The two most prominent secular bull markets resulted in the Dow Jones Industrial Average increasing by 10-fold or more. From 1942 to 1966, the Dow rose from 100 to 1000 and in the period from 1982 to 2000, the Dow went from 1,000 to 11,722. If the current implications are correct, we could be on the cusp of a run to Dow 100,000.

    Click here to see what the lone Dow Theory holdout is...

    Themes: Dow Theory Stocks: DIA, IYT
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Comments (2)
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  • ha ha ha

     

    wait... you're serious?

     

    Ask Zimbabwe how printing your way to create a super spike in your stock market works out
    14 Mar 2013, 01:35 PM Reply Like
  • Author’s reply » Greetings Tunaman,

     

    You may want read the section that says there is a lone Dow Theory holdout to the 10x rise in the Dow Industrials.

     

    As indicated above, that section can be found here:

     

    http://bit.ly/XaB5Gk).

     

    Thanks for reading and commenting.

     

    Regards.
    14 Mar 2013, 01:40 PM Reply Like
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