The great Dow Theorist, George Schaefer, set up two equal-dollar amount accounts early in the fabulous bull market that started in 1949. One account consisted of blue chip stocks and the other consisted of low-priced "cats and dogs." Schaefer told his subscribers that towards the end of the bull market his low-priced account would far outstrip his blue chip account. And sure enough, that's exactly what happened.
Below I show the ratio of RUT, the low-priced stock index, compared with the blue chip Dow. As you can see, the low-priced stocks are now far outpacing the blue chip Dow.
I take this chart as a warning that the stock market has become highly speculative and therefore increasingly dangerous. My subscribers should therefore be extremely cautious, and if the DIAs break below 154, sell them and move to the sidelines.
I show a chart of the DIAs below -- the horizontal blue line depicts critical ... Log in or subscribe to continue reading.
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