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Stocks at Record Highs: Is it Time to Sell Everything?

by Market Authority on February 1, 2013

in Commodities, Technical Analysis

It’s a theory that’s treated me well for years…

You simply buy the 10 Dow stocks with the highest dividend yields that have fallen out of favor with investors.  And, after a year of holding, you’re supposed to walk with gains across the board and a dividend to boot.

2013 should prove to be another successful year for the Dow, as markets push record, nosebleed highs on the heels of incessant, and reckless, money printing.

But I digress…

If you followed my advice on January 8, 2013, you bought AT&T (T)?Verizon (VZ)?Intel (INTC)?Merck (MRK)?Pfizer (PFE)?DuPont (DD)?Hewlett Packard (HPQ)?General Electric (GE)?McDonald’s (MCD)?and Johnson & Johnson (JNJ)… otherwise known as the 2013 Dogs of the Dow.

Here’s how each is doing after a month of trading:

AT&T found solid double bottom support just below $33 before running to $35.

Verizon is up slightly from about $42 to more than $43.50.

Intel ran from a low of about $20.50 to ore than $23.

Merck ran from $40 to more than $43.

Pfizer exploded off $24.70 lows to more than $27.50 in less than a month.

Hewlett Packard ram from $14 to more than $17.

General Electric ran from about $20 to more than $22.50.

McDonalds’s ran from $87 to more than $95.

And Johnson & Johnson ran from $69.50 to more than $74.

So far, so good… right?

It may be a good idea to begin taking some of those gains off the table, though, even though we’re only one month into the New Year.

And that’s because the Dow – and most markets for that matter – are grossly overvalued and over-extended.  Take a look at the Dow, for example.

This is a picture of insanity at its best…

There is no way this can sustain itself.  It’s toppy at the upper Bollinger Band.  Williams % Range says is overbought.  MACD and DMI are screaming sell me.  And RSI is in nosebleed territory.  Worse, the bulls have gotten way ahead of themselves again.  A reversal is in the cards.

But, as with all trades these days, this one carries a fair amount of risk, too.  Do not risk the house.  Do not risk more than you can afford to lose.  Play it safe.

The best way to trade this wild over-extension is with DIA put options, which we’re already profiting from in Speed Retirement.

Stay Ahead of the Herd,
Ian L Cooper
Speed Retirement System

Trading Headlines to Watch

Chesapeake CEO Stepping Down: Buyers Go Nuts…
On news of CEO retirement, Chesapeake Energy (CHK) was just upgraded from a Hold to a Buy, by Stifel Nicolaus.  And I expect to see even more upgrades shortly.

No End to Stimulus in Sight…?
Not every one is on board with, but for now the Fed will continue buying $85 billion in treasuries and mortgage-backed securities every month.  The Fed is also maintaining zero interest rates at your expense.  How nice of them…

20 Must-Read Quotes about Commodities…?Always listen to Ian Cooper sadly not among the best…

Resource Investors Rejoice: Good News Ahead…?
During the current commodity supercycle, there have been occasions—too many to count—when investor psyche has been damaged by reports about slowing U.S. growth, a hard landing in China or a debt crisis in Europe. Yet just behind the gloom, significant and positive trends are taking hold, causing the storms to start dissipating.

They’re “just going to kill the dollar”?
This doesn’t really surprise you… does it?

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