Will a Strong Dollar Doom the Stock Market?

Several unexpected events have happened since the election of Donald Trump as President. Among the most surprising for investors has been the fact that the dollar has become significantly stronger. Below is a chart of the US Dollar Index, a trade-weighted index that consists mostly of the euro and yen given the importance of trade completed in these two currencies. The Chinese renminbi is not represented in the index, which dates back to 1973 when China was not a significant player in the global economy. Some investors might consider this to be a weakness of the index, but no index is perfect ...
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Dogs of the Dow Picks for 2017

Sometimes, it seems as if there aren’t really any new ideas in the stock market. The Dogs of the Dow is an example of this. The Dogs is an investment strategy that is remarkably simple to implement. It requires trading once a year and has a long-term track record many active investment managers and hedge fund pros would envy. The roots of this idea can be traced back at least 60 years, a relatively old idea which means it has withstood the test of time. The Dogs strategy has a simple buy rule. At the end of the year, sort the 30 stocks in the Dow Jones Industrial Average by yield, from the ...
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The Best Trades for January

Traders have long understood the importance of seasonal tendencies. Hundreds of years ago, grain trading revolved the seasons. Seasonal trends also impacted shipping as some voyages were best made at certain times of the year and would be almost impossible at some times of the year. While this may seem to be limited to physical markets, we often see seasonal tendencies in financial markets. To be fair, some of these tendencies were based on requirements of physical markets like agriculture. As one example, throughout history, financial markets in the United States have shown a tendency to c...
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Which Chart Is Best?

Traders often turn to charts when deciding whether it is time to buy or sell. Over the years, they have developed a wide array of charting techniques in pursuit of increased profits. Some traders believe candle stick charts provide them with an edge over traders while others turn to point and figure charts and some remain loyal to traditional bar charts. No matter what type of chart they use, traders invariably face another decision which is whether the chart should be scaled arithmetically or logarithmically. This decision, whether to use arithmetic or logarithmic scaling, can actually lead t...
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Benefiting From the Dow Theory Buy Signal

In a recent article, we highlighted the latest Dow Theory buy signal. Rather than repeat the details of Dow Theory and explain the signal here, we recommend reading the original article. In this post, we want to address specific stocks that can benefit from the signal. Dow Theory relies on the principle that both production and transportation are important. This is a logical relationship. If factories are producing goods and no one is buying the output, inventory will stack up because there will be nowhere to ship the completed products to. In that environment, transportation companies will...
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A 100-Year Old Theory Screams Buy

 Charles Dow lived more than 100 years ago and wrote about the stock market in ways that still apply today. Dow obviously lived before computers were invented and his ideas are even more amazing when that fact is  considered. He couldn’t easily look at charts to learn from the past because charts were limited and the kind of charts we rely on today didn’t even exist at that time. In this way, Dow was a peer of his contemporary, Albert Einstein, who saw things differently. You may think a comparison between Einstein and Dow is a stretch but both advanced their fields of study in ways that would...
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Five Low-Priced Income Stocks

Interest rates are up since the election. Rates on the ten-year Treasury note has climbed more than 25% since Donald Trump became the President-elect. With the rate at 2.36%, investors with $1 million in ten-year Treasuries can earn income of $23,600 a year. This is a problem for two reasons. Many investors simply don’t have $1 million in Treasuries and if they do, the income of less than $2,000 a month may not be sufficient to maintain their standard of living. Elections always bring hope for change and this one is no different. The Federal Reserve is expected to raise interest rates three...
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Relative Valuation Tools: A Different Way of Looking at Value

Some investors claim value, like beauty, lies in the eye of the beholder. One of us might look at a stock with a price-to-earnings (P/E) ratio of 30 and see a bargain while others see an overvalued stock they’d never want to own. A true value investor might question why anyone besides an index investor would ever own a stock with a P/E ratio of 30. Index investors, of course, must own all of the stocks in the index they track no matter what the P/E ratio is. Value investors usually look for a low P/E ratio on an individual stock or the broad market for a buy signal. This is the idea behind ...
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Low-Priced Stocks Pulling Back in Long-Term Uptrends

With many major stock market indexes trading near new all-time highs, we could be in the early stages of a new bull market. Or, we could also be near the end of a bull market and the beginning of a bear market. High prices have a way of increasing optimism in some investors and raising fear levels in others. Overall, there seems to be a stronger argument to be made for the bullish case and the bull market appears likely to continue for at least several months. Among the factors pointing to higher highs are a strong technical picture in the major market averages and increasingly bullish sentime...
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