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INDEPENDENT Financial Advisor / Professional Investor- with over 30 years of navigating the Stock market's "fear and greed" cycles that challenge the average investor. Investment strategies that combine Theory, Practice and Experience to produce Portfolios focused on achieving positive... More
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  • Market Update - Another Dow Theory Buy Signal 31 comments
    Sep 18, 2013 6:42 PM | about stocks: DIA

    The "no taper" announcement sent the averages soaring , signaling another Dow theory buy signal with the Dow 30 & the Dow Transports confirming that by setting new highs today.

    But before we break out the champagne it might be worthwhile to look at the charts and see exactly what has transpired the last two times this year that new "buy" signals were given.

    On 5/21 the Dow transports vaulted to a new high , followed by the confirmation of a buy signal by the Dow 30 On 5/28 Dow 15409 , On 6/24 one month later the Dow stood @ 14659 . An approx. 4.8% drop.

    On 8/1 the transports once again hit a new high followed by another confirmation by the Dow 30 just one day later on 8/2. Dow 15658.

    On 8/30 one month later the Dow closed at 14810 or 5.4% lower.

    So here we are with a new confirmation today, the question is will we see the same results? I will let all decide for themselves , but for those that wish to go on a buying spree , I believe this pattern is worth noting.

    Of course I am not turning bearish as I believe once again this signal suggests equities will be higher down the road. Keeping with my position that stocks have further to run in this Secular Bull Market, longer term.

    Conclusion: While the Dow Signal is quite bullish , it can sometimes be confused with what may actually transpire in the short or intermediate term . Let's see if we get a meaningful follow thru.

    Below is a chart to illustrate this point.

    (click to enlarge)

    Themes: Dow Theory Buy Signal Stocks: DIA
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Comments (31)
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  • Thanks Steve!! It's definitely a hard to read situation.


    There was an SA article a few weeks ago, that pointed out that the downturn after the last QE endings... were about a month later coinciding with political "worries." Any moves I make, will be cautiously.


    I'm still trying to sort out what sectors the drop in interest rates will effect. And how foreign/emerging markets will react.


    At this point, do you feel stocks are overvalued for fundamentals yet? It's not that overvalued that goes with a market top yet...


    I'll post a link to your blog on IT's blog (someone was asking your opinion there)... if that's okay with you.
    18 Sep 2013, 07:30 PM Reply Like
  • Author’s reply » Curls,


    No problem if you want to post a link ,,


    I think we are entering into a fair valuation if not slightly overvalued territory here on the averages.


    I believe we just might be seeing an intermediate top here , let the earnings catch up to the quick moves we have seen. Then with the politics you mentioned yet to come on the debt ceiling that can scare everyone. But i dont see any "major" top forming here over valuations..


    The sector that had a nice move today with the drop in rates were the REITS , They were bashed because of rate fears and today they turned around (DLR) (O), (OHI) as examples.
    18 Sep 2013, 07:51 PM Reply Like
  • @ FG


    "Intermediate top" -- that would fit. It could climb a bit more first. Or do a 3% correction and have everyone claiming it's a "big one." Thanks for your thoughts on valuation. Very good to know from a bull's perspective!


    Now that I've sat around for a while, I definitely don't see a major top type mood out there. I do see the start of selling to retail on the idea of the market. So there's a shift. But it takes a long time to get from there to "no question" of being in noise bleed city.
    18 Sep 2013, 09:07 PM Reply Like
  • The fact that U.S., China, Japan and Europe all reporting positive news simultaneously is about all one needs to know to judge trends for global economies and markets. The rest is noise.
    18 Sep 2013, 08:24 PM Reply Like
  • Author’s reply » Tack


    A fact that most have ignored with all of the "fed obsession"
    18 Sep 2013, 08:35 PM Reply Like
  • @Tack


    Can you explain how all the positive news is "all one needs to know to judge trends"? I'm not understanding your analysis. Thanks!
    18 Sep 2013, 08:30 PM Reply Like
  • C:


    The recent reports show the Chinese economy expanding again, Japan showing better economic data and Europe has moved into expansion for the first time since the crisis, along with continued expansionary data here.


    Frankly, the forward risk, if any, is that excess reserves start flowing into loans at an accelerated pace, creating inflationary pressures, more than any economic reversal or recession. That's why I am disappointed in both Larry Summers withdrawal and today's news from the Fed. I think the interest-rate happiness will be rather short-lived, despite claims by the Fed about 2015. While I have a significant yield-oriented portfolio, I am also adding inflation-favorable issues in energy and commodities. Presently, I like the outlook, especially, for continued gains in Europe, as well as deep-value picks in Brazil.


    I see few impediments to continued economic expansion; it's just a question of whether things proceed at a gradual or accelerated pace.
    18 Sep 2013, 08:40 PM Reply Like
  • @Tack


    Thanks! That adds a lot of dimension to the overseas news. I was noticing that things seem shifted all over the place. Your analysis makes a whole lot of sense to me!


    On a devil's advocate thought...maybe the US will no longer the the only positive spot out there... and in return money will move out of US and reinforce that? Not that it'd create a huge move down, nor effect US economy... but maybe create a less exuberant US market?
    18 Sep 2013, 09:01 PM Reply Like
  • c:


    I don't think so because U.S. market volumes remain relatively low. There's plenty liquidity to drive everybdoy's market higher; it doesn't have to shift from one to another.
    18 Sep 2013, 09:17 PM Reply Like
  • @Tack


    Ahh, good point!
    18 Sep 2013, 10:50 PM Reply Like
  • Maybe a good time to take a little off the top, so that you have some cash on hand for any bumps in the road coming up. With the federal budget battle up next, there are sure to be some bumps.


    Plus we are getting mixed signals on the state of the economy. Supposedly the retailers have had terrible back to school sales. So earnings will be disappointing in some sectors. Will there be any areas that have made money? I'm looking for the 4th quarter of the year to make up some of that, so we might see a market downturn when the results of the 3rd quarter earnings are out. When the 4th quarter comes out, then we might see next year start out better.


    With the incredible run up the markets have had in the past year, maybe we do need to stop & take a breather.


    Just read some interesting comments about Obamacare. So low end workers (McDonald's, Walmart, etc) will be working 30 hours or less to avoid health care costs. Meanwhile, people who have benefits will be working 60 hours (or more) - because their company will want to get every drop they can out of employees to minimize healthcare costs. I think we are already seeing it.
    19 Sep 2013, 03:20 PM Reply Like
  • @BSF,


    Thanks for reminding me that if it's ever proposed that I go salary instead of hourly, it's time to quit on the spot instead of just fantasizing about it...


    But I wonder if there's a new trend. I got an instant 12% raise this year by agreeing to forgoe benefits. I found out later that the deal excludes the 401k, so I started contributing again. I gave up health insurance with my hospital (I pay the same premium for the same benefits with BC/BS right now). I gave up paid days off, but I'm currently working seven days on/seven days off so if I want a vacation I can work that out. If I get sick, I can probably work out a deal with a co-worker to swap shifts.


    So I'm wondering if in the future if organizations/companies will be willing to pay more to employees who give up health insurance with that company if the employees can prove they're insured privately...


    @F&G and Tack,


    Miss having you guys put people in their place on the other blog. Best wishes and will keep reading both of your comments.
    19 Sep 2013, 05:28 PM Reply Like
  • Author’s reply » Blue & User , thanks for the commentary,


    Speaking for myself , its gets tiring putting people in their place - ;)
    On It's blog it seems like one has to always defend an equity position that in reality is working.. Only to hear the trumpets of the precious metals bunch when they have a good day...They make it seem Like those that have invested in equities are just wrong and are in the poor house ;)


    Good to see both of you here ....enjoy your .02 :)
    19 Sep 2013, 06:01 PM Reply Like
  • Heh.... "Bugs". Always entertaining. I enjoyed gold's fall almost as much as Apple's. :)
    19 Sep 2013, 11:55 PM Reply Like
  • You are right on the money F&G.


    At some point it is boring to have to defend a strategy that is working since the end of the last bear in 2009!!


    23 Sep 2013, 05:19 AM Reply Like
  • Author’s reply » Krusty


    Enjoying the litte "Pop" on AAPL this Am ??
    23 Sep 2013, 09:06 AM Reply Like
  • Indeed! ;-)
    23 Sep 2013, 09:12 AM Reply Like
  • @User7


    I've been saying for a long time, and I wish g'vt had considered... that the first step to health care reform should be detaching it from jobs. Make it illegal to provide health care as a job benefit.


    That would solve a good deal of the "can't get insurance" because of switched jobs, and pre-existing conditions while on prior jobs. Also make it easier to sell the product across many state lines so it's cost effect to be an insurer. Legislate some kind of limited time premium increase if you want to switch companies with the pre-existing. That would solve 95% (my guess) of people who need but can't get insurance. What's left are mostly low income people, for whom this isn't their own problem.


    All that said in a mere paragraph... so definitely simpler than the current solution with all it's weird twists.


    You're idea of leaving health care behind by companies -- will probably become an ipso-facto solution to the mess -- that should have been there all along.
    19 Sep 2013, 05:42 PM Reply Like
  • Author’s reply » Curls ,,


    I rarely like t get involved in the politics , but i can only say from what i have read , Obamacare is a detriment
    19 Sep 2013, 06:02 PM Reply Like
  • @ Curls,


    Agree with everything you said. I was at the point of quitting last year (I don't like my job) and the dayshift supervisor begged me to come to the current shift. That meant that I would be working less hours per paycheck and couldn't afford it at the time. And, my employer doubled the insurance premiums.


    So. I noticed in my benefits package the previously mentioned raise with ominous warnings about losing all benefits blah, blah, blah. It was mandated that I must have health insurance to do this - spouse coverage or whatever. I searched around for a couple of weeks and found that BC/BS would provide the same premium for the same benefits (high-deductible, but works if you're fairly young and have the cash to cover the premium) and they would accept me and I had coverage state-wide annnnd I was not limited to services by my employing hospital and associated physicians.


    If I was injured while camping or whatever in another part of the state with my previous insurance, I would not be covered unless I was sent to My hospital (nevermind that it's against the rules, but I know very well that co-workers get curious to look up your records - a buddy of mine did this and was found out and forced to quit - he's lucky to still be able to work). Now, as long as I'm in state, I can get treatment just about anywhere. And I believe I get partial coverage in other states.


    I do not know if I will be able to do this next year with the Obamacare stuff. I still do not understand it. But if able, I will stick with BC/BS.


    I started following your comments a while back. Can you do the same for mine? : (
    19 Sep 2013, 06:19 PM Reply Like
  • @ U7


    You're being followed :). I thought I was following you already. It's taking me a long time to get used to SA and set myself up. (I only learned about bookmarking articles last week, lol.)
    19 Sep 2013, 08:28 PM Reply Like
  • @Curls,


    Thanks. The more stalkers I have on the internet, the better I feel.
    20 Sep 2013, 04:25 PM Reply Like
  • Author’s reply » For the record -- Since 1970 there have been 17 “shutdowns,” the markets have survived all of them . in 11 of those 17 instances the S&P 500 (SPX/1691.75) was higher one month later.


    Avoid the noise , lose the emotion --- Stay the course...
    1 Oct 2013, 10:34 AM Reply Like
  • Hey Fear, did you have a look at (MSFT)?


    I am so tempted righ now...but I do not know if we will see growth from the Windows division within the next 18 months.
    1 Oct 2013, 11:06 AM Reply Like
  • Or ever.....
    1 Oct 2013, 11:11 AM Reply Like
  • Hi Tack,


    That bad?
    1 Oct 2013, 11:15 AM Reply Like
  • K:


    Well, it is hard to see what the growth vehicle is for Windows. MSFT tried to make it the be-all,end-all for PC's, tablets, phones, etc., but that effort has been a near disaster, as all those devices have different uses and respond to different types of user interfaces, so Windows 8 hasn't served any of them well. Thinking a touchy-feely touchscreen-oriented Hollywood-Squares interface was going to be adopted in the no-nonsense corporate world just demonstrates how far out into outer space MSFT has wandered under rather inept leadership. They have behaved like the slow-bureaucratic, design-by-committee behemoth that they are, so no surprise there.


    Now, the PC market is shrinking by the day, MSFT's phone efforts are near worthless and much too late in the operating-system game, and their tablet efforts have been crippled by a completely ill-conceived RT effort and by the fact that Windows is too fat, dumb and power hungry for the tablet sweet spot, not to mention that they are starving for apps.


    Nope, I don't see any reason to invest in MSFT for growth, and I wonder how long they can even keep their cash cow alive and throwing off milk. Unless they have a startling reversal, I see their future more like HP or Dell, if not RIMM, rather than anything to get excited about.


    P.S. MSFT's dominance in PC's, along with their bloated, processor- and power-hungry software, also, lulled Intel into a coma, just cranking out processors to meet Windows incessant demands, and allowed ARMH, and others, to steal the march from them by making processors that served much more efficient software and devices where power conservation was at a premium. They're still trying to catch up, and even that future is uncertain.
    1 Oct 2013, 11:55 AM Reply Like
  • Author’s reply » Krusty,


    there are days when i look at MSFT and say i need to add it , then as Tack mentioned i start to come up a bunch of reasons to stay on the sidelines..
    1 Oct 2013, 12:06 PM Reply Like
  • Tack and Fear:


    What about the new CEO to give a new strategic breath to the business?
    1 Oct 2013, 12:11 PM Reply Like
  • krusty:


    It's like a person, who's spent ten or fifteen years eating Twinkies, who finally gets a new fitness trainer. The person isn't going to be running any sprints or marathons overnight. The type of employees and managers that are cultivated, over time, by corporate behemoths, like MSFT, doesn't lend itself to sudden entrepreneurial activities.
    1 Oct 2013, 12:22 PM Reply Like
  • @ Tack


    Is that why MSFT is struggling, lack of riding the next wave to handhelds? Makes perfect sense now that you point it out. Hadn't thoughts of that being the Intel challenge too.


    I'd assume they have good enough programmers to get themselves out of the hole -- but they've not done great designing for years & years. It was a combo of Gate's marketing prowess, and some early software development. But after that, with each release there was so very much they could have done better. Hence the joke that windows was the car that drove on 95% of the roads but randomly stopped or spit smoke as it wished. While macs run beautifully on 5% of the roads... So I can see limits here...


    I still wouldn't count them out completely - but thanks everyone, for the excellent insights in the story there...
    6 Oct 2013, 01:37 PM Reply Like
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