Dow 30 Stocks: What Do They Reveal

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Dow 30 Stocks

Dow 30 Stocks

So what is the Dow 30? Well according to Wikipedia

The Dow Jones Industrial Average (DJIA), or simply the Dow (/ˈdaʊ/), is a stock market index that measures the stock performance of 30 large companies listed on stock exchanges in the United States. Although it is one of the most commonly followed equity indices, many consider the Dow to be an inadequate representation of the overall U.S. stock market compared to total market indices such as the Wilshire 5000 or Russell 3000 because it only includes 30 large-cap companies, is not weighted by market capitalization, and does not use a weighted arithmetic mean.

The value of the index is the sum of the price of one share of stock for each component company divided by a factor which changes whenever one of the component stocks has a stock split or stock dividend, so as to generate a consistent value for the index. Since the divisor is currently around 0.1474, the value of the index is 6.7843 times larger than the sum of the component prices. Wikipedia

What’s the significance of the Dow 30 stocks

Market Data by TradingView

The Dow 30, commonly referred to as just the “Dow,” or the “Dow Jones Industrial Average,” was created by Wall Street Journal editor Charles Dow and got its name from Dow and his business partner Edward Jones. The index was developed as a simple means of tracking U.S. market performance in an age when information flow was often limited. The combined stock price of these 30 large, publicly-traded companies determines the Dow Jones Industrial Average. As some of the top stocks in the marketplace, the belief is that the Dow 30 represents a strong assessment of the market’s overall health and tendencies. Investopedia

What are the Dow 30 stocks signalling,  May 2019 update

According to the Tactical Investor Alternative Dow theory, it is the Dow utilities that lead the way up or down. The utilities are holding up just fine and are and based the ETF IDU, they just put in a new high; Translation, the Dow is likely to take the same path and the same holds true for the Dow transports.

The Weekly Chart of the Dow

The bulls and the bears are both nervous; very few envision the Dow testing the 29K ranges and possibly overshooting to Dow 30K, and that is the reason why this scenario could come to pass.

On the weekly charts (shown below), the Dow is still trading in the extremely overbought ranges. In fact, the MACD’s have yet to experience a bearish crossover, so the odds are quite high that the Dow will at least or take out its lows again and possibly overshoot the current lows by a few hundred points.

The weekly charts are suggesting that we should be ready for volatile action over the next few weeks.

Dogs Of the Dow Dec 2019 Update

While V readings have not risen, they are still trading in the stratosphere and trading 3700 points above the overbought zone.  Unfortunately, wild weather, increased violence, turbo-charged levels of

polarisation and incredibly stupid behaviour on all fronts serves to validate that high readings are a sign that all is not well. After the holidays, there is a good chance that the Markets will experience a wave of volatility in the 1st quarter, perhaps as early as January. Do not equate volatile action with a

stock market crash; they are not the same thing.

Dow 30K now seems almost guaranteed. When we first issued those targets over two years ago, everyone thought we were insane, and that’s great because when people agree with us, we get nervous.

Tactical Investor Dogs Of the Dow theory

We received many questions on the Tactical Version of the “Dogs of the Dow” Theory.  We will cover some of them below, and we will also look at some historical examples and one or two new examples.  The first issue was regarding the dividend criteria that are imposed on the original Dogs of the Dow; as we stated before we don’t care about the dividend factor. We are looking for the best possible outcome and in order, to that, we consider two factors if the trend is positive (bullish)

  • The stock has to be trading in the extremely or insanely oversold ranges on the monthly charts
  • The risk to reward ratio has to be in our favour

If the stock happens to pay a high dividend, then that’s a bonus, but the dividend factor is not part of the equation.

The next question was regarding how one gets into these plays as in entry and exit points

We issued suggested entry points in the last update, and as we stated, we are examining the idea of adding this as another bonus to this service. We will make that determination after we have conducted all our tests regarding the new AI (Artificial intelligence) service we discussed several times this year. In the interim, if one wants an update on the Dogs of the Dow plays, one can always write in and ask for an update, but please specify the stock or stocks. As we are dealing with monthly charts, there won’t be any noticeable change in the pattern for at least 6-9 weeks.  Remember on the monthly charts; each bar represents a month’s worth of data; we focus on these charts because they provide an eagle’s eye view of what’s going in the markets.

Many traders think it’s essential to focus on the shorter timelines; in general, that is a waste of time and a perfect recipe for sleepless nights and 5X more stress. We don’t waste time on the daily or hourly charts; the only second timeline we will look at is the weekly chart. In this chart, each bar represents one week’s worth of data. We look at these timelines because some stocks are extremely volatile, and when the weekly chart issues a sell; they can shed up to 30% from their highs before rebounding strongly. Thus we look at these charts to see if we can jump in and out of the stock, or use a sharp pullback to open additional long positions provided the risk to reward factor is in our favour.

Two historical examples of TI Dogs of The Dow Plays

NKE

One could have opened positions from April to late July 2017 and sold roughly in Oct of 2018. The idea is not to try time the exact bottom or sell at the exact top, but to get in when the stock is trading in the extremely oversold ranges and to sell when it’s trading in the extremely overbought ranges.  One could have got in 50 to 55 ranges and closed the position in the 73 to 76 ranges, for a gain of roughly 41% if we take the midway point on the entry and exit prices.

Even 35% is a great gain considering the average yield on the dogs of the Dow for the past 20 years has been 10.8%. NKE is moving into the buy zone again.

PG

Long positions could have been opened from Sept to Nov 2018 in the 73 to 78 ranges. Positions could have been closed out in the 118 to 122 dollars for an average gain of 58%; holding time roughly 12 months.

 

Current  Dow Of The Dogs Plays Traders Can Consider

CAT

Investors can open longs in the 142.50 to 145 ranges and hold until the MACD and RSI move into the extremely overbought ranges

MMM

Open longs at 155 or better, and if it dips to the 145-147 ranges, additional funds can be allocated to this position

AAPL

If it trades in the 207 to 211 ranges, investors can commit one portion of their funds and another lot if it dips to the 190 to 193 ranges.

JNJ

Long positions can be opened in the 135 to 136 ranges, and another lot of funds can be deployed if it dips to the 128 to 129 ranges.

Random suggestions on coping with stock market crashes

Mass Psychology clearly advocates that stock market crashes are nothing but long term buying opportunities.  Pull up a long term chart and you will be forced to arrive at the same conclusion.  The Big player’s game strategy is to get individuals to focus on words such as bear market, crash, and end of the world, etc.; in doing so, the crowd focuses on the tree and forgets the forest.

Stock market March 2020 Outlook Update

The 1987 crash and 2008 crash fell into the category of the “mother of all buying opportunities“, but we could get a setup that could blow these setups and create the “father of all opportunities“. Such an event is so rare that it might occur only once during an individuals lifetime. In the short term, there is no denying the landscape looks like a massacre, but if one is going to focus solely on the short timelines, then the odds of banking huge profits are quite slim.

Just 15 days ago, everyone would have begged for such prices, but 15 days later everyone is ready to throw the towel in.  The volatility is likely to continue until the end of the month, especially since V readings soared by a whopping 650 points to an all-time high. Again, think about it, when was the last time the Fed dropped rates by 150 basis points in two weeks.  This is a massive development but its overshadowed by the current hysteria. As we stated before, companies are going to go ballistic with their share buyback programs.

When the panic subsides, it will create a feeding frenzy of the likes we have never seen before.  When you combine zero rates, two trillion dollar injection by the Feds and several more billion-dollar packages designed to stimulate the economy, the result is going to be a market melting upwards. The markets will be driven to heights that are unimaginable by today’s standards. Zero rates are also going to force a large portion of individuals on a fixed income to speculate, and these guys have a lot of cash sitting on the sidelines.

Insiders are devouring stock

Insiders have been using this massive pullback to purchase shares, and one way to measure the intensity of their buying is to check the sell to buy ratio. Any reading  2.00 is considered normal, and below 0.90 is considered as exceptionally bullish. So what do you think the current ratio is; well, it’s at a mind-numbing 0.35, which means these guys are backing up the truck and purchasing shares.

So what are the readings today? Based on very heavy transaction volume, Vickers’ benchmark NYSE/ASE One-Week Sell/Buy Ratio is 0.33, and the Total one-week reading is 0.35. Insiders are not just buying shares, they are devouring shares. Insiders behaved in a similar fashion in late-December 2018, after stocks crashed on Christmas Eve; in early 2016, when stocks also corrected; and in late 2008/early 2009, at the depths of the Great Recession correction. Those were spectacular times to buy stocks. Insiders seem to be telling us that today offers a similar opportunity.  https://yhoo.it/2TV0cE2

These guys might not have a pulse on the economy, but they the inner workings of their companies like the back of their hands. We have yet another powerful indicator that this massive pullback is a once in a generational buying opportunity.

After looking at the charts and the sentiment, this is probably one of the best buying opportunities individuals have had since 1987. We say the best because this massive pullback did not occur on the back of bullish sentiment; the crowd was uncertain before Coronavirus was even an issue. Hence this pullback/crash took place on a note of uncertainty. It’s unprecedented as that has never occurred before, which means that the melt-up is going to be equally spectacular.

We will be issuing entry points for several plays like GOOGL, PNC, INTC, NFLX, FB, etc to subscribers of our premium service. Large caps stock tend to perform better during the first stages of the recovery phase.

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