The 8 Dogs Of The Dow Perform for a month

Outperformed The Average In November, But Lag For The Year

Photographer: Michael Nagle/Bloomberg

The Dow Jones Industrial Average begins December up 22.8% year-to-date, up from 18.3% a month ago. The eight “Dogs of the Dow” have an aggregate gain of 13.1% this year, up from 8.9% a month ago.

The weekly chart for the Dow remains positive but extremely overbought with the average above its five-week modified moving average of 23,381.40. The benchmark average is well above its 200-week simple moving average, or “reversion to the mean” at 18,450.09, last tested during the week of Feb. 12, 2016 when the average was 15,819.45. The 12 x 3 x 3 weekly slow stochastic reading is 94.00, well above the overbought threshold of 80.00 and above the 90.00 reading, which I view as the indication of an “inflating parabolic bubble.”

November ended with the Dow setting an all-time intraday high of 24,327.82, well above all of my targets for 2017. When this occurs, investors should reduce allocations to Dow stocks by 50% and enjoy solid gains for 2017. Congratulations.

When we open in 2018, I will likely show limited upside as the year begins. Perhaps this implies that investors will be considering raising cash once tax reform is in place for the new year. If there is a pullback in December, my monthly pivot is 24,107. A weekly close below this level indicates risk to quarterly, semiannual and annual pivots at 23,256, 22,432 and 22,041, respectively, on year end profit-taking.

The Year-To-Date Scorecard For The Eight “Dogs Of The Dow” For 2017

Courtesy of MetaStock Xenith

Scorecard For The 8 Dogs Of The Dow

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Boeing (BA) ended 2016 with a dividend yield of 3.65%, and it’s now only 2.34%, so it’s no longer a dividend play.

Courtesy of MetaStock Xenith

Courtesy of MetaStock Xenith

The weekly chart for Boeing is positive but overbought with the stock above its five-week modified moving average of $262.33, and above its 200-week simple moving average of $152.86, which is the reversion to the mean, last tested during the week of Feb. 26, 2016 when the average was $115.75. The 12x3x3 weekly slow stochastic reading ended November at 87.67, still well above the overbought threshold of 80.00.

Investment Strategy: Buy weakness to my quarterly value level of $218.35 and semiannual and annual value levels of $210.91 and $177.45, respectively. Sell strength to my monthly risky level of $293.83.

Cisco Systems (CSCO) ended 2016 with a dividend yield of 3.84%, and it is now yielding 3.35%, still in the top 8.

Courtesy of MetaStock Xenith

Courtesy of MetaStock Xenith

The weekly chart for Cisco is positive but overbought with the stock above its five-week modified moving average of $35.13. The stock is above its 200-week simple moving average of $28.47, which is the reversion to the mean, last tested during the week of Feb. 12, 2016 when the average was $23.61. The 12x3x3 weekly slow stochastic reading ended November at 88.28, well above the overbought threshold of 80.00.

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