The 30 stocks that make up the DJI are price weighted. A stock trading at 100 has 2x more impact than a stock trading at 50. Out of the top 10 DOW stocks by weight 8/10 are within 1% of 52 week high as of MAR 20.
IBM 215 = 1% from 52 week high
CVX 120.35 1% from 52 week high
MMM 105.66 = 1% from 52 week high
MCD 98 = 1% from 52 week high
UTX 93.45 = 1% from 52 week high
XOM 88.63 6% from 52 week high
CAT 86.94 29% from 52 week high
BA 85.37 1% from 52 week high
TRV 83.84 = 1% from 52 week high
JNJ 79.45 = 1% from 52 week high
19/30 DOW stocks are within 5% of 52 week high.
15/30 DOW stocks are about 1% from 52 week high.
Only 6/30 DOW stocks are 10% away from 52 week high.
Feel free to disagree but my opinion is that the DJI is due a minimum 15-20% correction very soon.
1. Too many of the DOW components are near a 52 week high.
2. People are buying stocks now based simply on Bernanke-related euphoria.
3. People are jumping into the stock market especially DOW stocks trying to chase new highs.
4. Consumer spending & middle class income in the US is on the way down.
5. Unemployment rate is much higher than what the gov tells you.
6. Housing market not really improving at all...buying to rent is creating a new housing bubble.
5. Bernanke is adding $1 trillion a year to the national debt propping up the US market.
6. Europe is one good bank run away from breaking apart...current problems being ignored.
The DJI closed today at 14511.73. I predict that sometime in the next 8 weeks the DJI will top out around 15500-16000. From there it may free fall.
Agree with the time frame July-September. I think the DJI will range between 15,000-15,500 in June with strong support around 15k. The DJI SMA(50) is currently @ 14809.70 and when it closes below 15,000 look out below.
The DJI closed today at 15354.40. The top 10 DOW stocks by weight have an average PE of 15.14.
The usual May sell-off looks unlikely. Negative news is having no effect on the market. If there is a correction this year odds are it will start by the end of August. I have a feeling it will correct in July.
"In 2013 under QE3 the Federal Reserve will increase printing from $40 to $85 Billion per month by purchasing $40 Billion a month in MBS (home-backed loans) AND additional $45 billion in 10-30 year US Government treasurys (loans) from financial institutions. This is equivalent to 20.4 million jobs per year paying $50,000 / year."
What could signal the beginning of a correction/crash?
-DJI closes below 50 day SMA
-DJI closes down 3 days in a row
-One or more countries announce that they will be leaving the Euro
-Fed announces QE3 reduction/elimination
DJI closed at 14,802 on Wednesday. Next stop is likely 15,000. It should top out in the 15.5k-16k range over the next few weeks. People are soon to forget that the market acts bipolar and can turn on a dime. If I am right the DJI should snowball from there falling below 13200 later this year.
Europe will move this market...forgotten ≠ fixed.
France is hurting and I get the feeling Germany wants out of the euro.
*Zerohedge, Slope of Hope, and Calculated Risk are all great news sources...the best way to track what is going on in Europe. While they are overly pessimistic they base their opinions on facts that are kept out of the mainstream media.
IBM = 1% from 52 week high 11.34% weight of DOW as of march 19, 2013
CVX = 1% from 52 week high 6.35%
MMM = 1% from 52 week high 5.59%
MCD = 1% from 52 week high 5.23%
UTX = 1% from 52 week high 4.95%
XOM = 6% from 52 week high 4.71%
CAT = 29% from 52 week high 4.69%
BA = 1% from 52 week high 4.54%
TRV = 1% from 52 week high 4.42%
JNJ = 1% from 52 week high 4.19%
Total of 10 biggest Dow components: 56.01%
My high estimate for the DOW is just a guess. A month ago I was predicting a top near 15000. To be on the safe side I will probably wait until the DJI is near/below 14000 before buying any shares of SDOW.