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Dow in Red for Year, 15-51i Not

Jun 02, 2012
The Dow Jones Industrial Average continued its correction this week ending June 1, 2012. The Average lost 339 points, or 2.7%, of its value in this four-day trading week; and is now down 1% for the year.

The 15-51 strength Indicator was also down for the week, shedding 1.3% of its value. Despite poor Market fundamentals, the Indicator remains up 22.7% for the year. That’s the 15-51 difference. Here’s the picture.

6-1-12a

Wall Street and its propaganda machine spent most of the week in a tizzy about the Dow’s losses, recent news headlines, and gold’s reversal compared to other commodity selloffs (oil the most notable.) Here’s a sample of Wall Street Journal headlines appearing in the last few days:
  1. U.S. Jobs Slowdown Adds to Global Mire (U.S. unemployment again 8.2%)
  2. Sharp Slowdown in Asia Sounds Warning
  3. Euro-Zone Jobless Rate Is at 11%
It’s bad news, yes. But it’s not new news.  

Those who have been following these blogs know the reason for the Dow’s volatility this week. It had no right being valued at the top of the action zone and a correction had no choice but to occur. These early season fluff-and-puffs are becoming quite the pattern (see: Discipline). In fact, stocks shouldn’t be trading above the action zone midpoint considering the negative stimuli facing world Markets. 

In the most recent 12 months, the Dow Jones Industrial Average is down 4%. Fundamentally that makes sense. The 15-51 Indicator is up 29% in the most recent year – and as mentioned, 23% points of that gain happened in the first five months of 2012. That’s an indication that stocks are still over-valued at this time. See chart below. 

6-1-12b

Corrections happen all the time (see: Correction or Bear Market?) and as demonstrated in my book, it’s extremely easy to stay ahead of the stock market game if you know how everything works and what to look for. Stock market corrections should be expected. 

And just like bad money policy causes gold to correct upward, other commodities like oil move and correct for their own reasons. In poor economic conditions and the realization of recession, less goods get produced. Dictated by high unemployment, and with less goods made and consumed, less products travel to markets, and thus, less oil is required to move products into markets. The drop in oil prices stands to reason – just like gold’s turnabout and the Dow’s recent retreat from the action zone high.  

As chronicled in the archives of these blogs, Market fundamentals have remained persistently negative for far too long – unemployment is painfully high, monetary and fiscal polices are blasphemous, and the world is slipping further into recession. This didn’t happen yesterday – or this week. The Wall Street establishment and its propaganda arm simply woke up and read the news this week. Let’s be fair, both Wall Street and the media make big money by stoking stock market volatility. There are news cycles, after all.  

I caution independent investors to not get caught up in the hype. Investing is about making money with money – to buy marketable investments low and to sell them high. 

Independent investors must stay focused on the most important Market fundamentals so they don’t get fooled into buying high and selling low because of pressure from Wall Street propaganda and stock market volatility (see: Jump in or Stay Put). 

Until then -- be patient. And let me know if you need help
 
 
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