Fast forward, the INDU bottomed on November 15, 2012 and marched higher into its mid-December short-term peak for a 5.66% gain. The ensuing decline was only 2.7% before the back-to-back 90% Upside Volume Days of December 31 and January 2, 2013 that started this year’s “buying stampede.” As of last Friday said stampede has lifted the Dow another 8.2%. The combined ride from November 2012’s intraday “lows” to the recent intraday “highs” has been 12.4%. Like in 1982, this two-step rise has left the Industrials and the S&P 500 (SPX/1517.93) within striking distance of their respective all-time highs. Whether they get through them on the first try remains to be seen, but many of the other indices have already done so. Yet, none of this really speaks to my emailer’s question about “doing something.”
To that point, I continue to like the strategy espoused by my friends at the Riverfront organization. To wit:
“First, identify the quantity of cash to be put to work – example: 20%. Second, break the trade into digestible chunks – example: break it into four parts, 5% each. Third, implement the first trade today – example: invest 5% into equities today. Fourth, set a date for implementing the second trade – example: two months from today invest the second 5%. Fifth, implement third and fourth segments if the market pulls back – example: invest the remaining 10% of the cash on market pullbacks. And six, after the date of the second trade occurs, return to step one with the remaining cash – example: two months from today, if the market never provides the opportunity to buy on a pullback, break the remaining 10% up into three to four parts and follow a strategy similar to the one utilized for investing the first 10%.”
As for what to buy, a few of the equity-centric mutual funds I own, and know and talk to the portfolio managers, are: GaveKal Knowledge Leaders (GAVAX/$12.33); Goldman Sachs Dividend Growth (GSRAX/$16.24); Hennessy Small Capitalization Financial (HSFNX/$21.53); Lord Abbett Growth Leaders (LGLAX/$16.58); MFS International Diversification (MDIDX/$14.64); and Putnam Capital Spectrum (PVSAX/$28.18). As for individual stocks, I would point you to our Analyst Current Favorites list, which can be retrieved by contacting your financial advisor.
The call for this week: Well, here we are with tomorrow night’s State of the Union address. Consequently, I am looking for a trading top this week follow by a 5% - 7% pullback and then we’ll see how the markets handle themselves. Again, if I could script it, I would like to see the Dow Industrials confirm the Dow Transports with a new all-time high of their own, which would use up all the stock market’s remaining internal energy on a short-term basis, resulting in a “sell on the news” pullback. However, they don’t operate the various markets for my benefit.
