A basic principle of Dow Theory concerns itself with VALUES. One of the great tests of values is the return on investment. Charles Dow emphasized the dividend yield on stocks. Dow believed that aside from some special circumstances, when a stock yields less than 3.5%, it's overpriced.
The dividend yield on the D-J Industrial Average is now 2.3%, well below Dow's danger level. Subscribers who are impatient might ask themselves, "Is it worth speculating in an overpriced and over-loved market, when we know that prices have been artificially pushed up by a desperate Federal Reserve? Furthermore, is it worth it when we know that any short-term profits will be taxed at the regular income level?"
Below I show a chart of the Dow along with its 200-day moving average. Whenever the Dow breaks below its 200-day MA, we never know whether this is the signal for a short-term decline, as it was ... Log in or subscribe to continue reading.
Premium Content Notification
A subscription is necessary to access premium content.
Please use the button below to subscribe in order to access all premium articles