AlphaDow

Archive for July, 2009|Monthly archive page

DOW THEORY SIGNALS NEW BULL MARKET

In Uncategorized on July 24, 2009 at 11:13 pm

bull mkt“Those who forget the past are doomed to repeat it” – Santayana

I can’t help but bring up the analogy of the “noise canceling headphones’ again.  My wife Sarah gets a chuckle out of all the responses to that one (she calls them ‘Sarah canceling headphones’).  The real benefit of Dow Theory may be proving it’s merit right now.  With all the talk of ‘green shoots’ and falling jobless claims, no one seems to believe the recession is over.  I play on a hockey team with a number of people in the financial business, and to a person they are skeptical.  Me, on the other hand, I prefer to leave the ‘noise canceling headphones’ on and follow the one barometer that has consistently signaled every major turn in the market since 1906.

To recap, on July 20th the Dow Jones Industrial average made a new high above its June 12th high of 8799.26.  Yesterday, the Dow Jones Transportation Average made a new high above its June 11th high of 3399.88.  This means that Dow Theory has signaled a new Bull market in stocks.  So what to do?  It may be time to equitize some of the cash that we have had sitting on the sidelines for so long.

One way to equitize cash is to purchase an Exchange Traded Fund (ETF) or Closed End Fund (CEF) that tracks an index or sector that you like.  I use our ETF Advisor program to determine the highest Relative  Strength (RS) countries and sectors (email me for a copy).  Right now the strongest sectors are the Banks, Materials and Technology.  The strongest countries in the world are China, Singapore, South Korea, Hong Kong, Taiwan and Brazil.  Be sure to use stop losses approximately 8-10% under your purchase prices.

ndt july09

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