The Dow Approach
The Dow Approach
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FOOL GLOBAL WIRE LEXINGTON, Kentucky (January 15) -- For Dow stocks, today was virtually an x-ray image of yesterday's session. With most stocks up yesterday (except the oil stocks), today's session gave up much of those profits (again, except for the oil stocks). Given that the Dow Industrials rose almost 500 points over the last month, from a closing low on December 16 of 6268.35 to yesterday's 6762.29, it's not surprising to have a day like today where some traders take profits and others wait for the next government number to worry about. But what if? What if the Dow rose 7.88% every month? What if we doubled the Dow every month? What if ... ah, it doesn't matter because it's just not realistic. Face it, the last four weeks have been terrific. A 7.88% monthly return would be an annual rate of nearly 150%. Compare that to the actual Dow historical average of 11% - 12% and you'll get an idea of just how sweet the last month has been for blue chip investors. The important thing to realize, though, is that you have to be invested when these spurts come to profit from them. It's not unusual for the market to record the lion's share of its annual profits in one or two spurts like this and then move sideways or up and down through much of the rest of the year. So if you're playing market-timing games, jumping into and out of the market based on the market indicator du jour, you're likely to miss these rapid spurts, and thus the majority of the market's gains for the year. It pays to be patient through the lean times because the gains in those remarkable periods can be so rewarding. The rest of the time is supposed to be boring. How else do you expect to get that putting stroke back? |
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