Another Relative High for the Dow

The Dow pushed to another new high on Friday but still left several indexes behind.  It’s true that the SP500 has been able to follow to a new relative high but we are most interested in the NASDAQ 100, the NDX.  This index is the basis for the two Rydex funds we are following at the bottom of each post.  We find it time once again to recommend buying one or both of them due to the market starting to get over bought.  These opportunities may not last for very long but they are here now so we should take advantage of them.

We are fairly convinced that the market will drop into the fall of the year with the nadir, low point, coming in September or October, maybe early November.  I don’t think we have expressed our opinion about how far these indexes can travel but we think a substantial amount.  This fall we will be set up for a good buying opportunity, better than we saw in the fall of 2005, or at least as good.  The point being, this opportunity will come with some value, a quality us contrarians like to embrace.  

So, right now the NASDAQ Comp is trading right at the 2300 level and we expect that by the time October comes, that index will be trading near 1600, or about a 700 point, 30% move.  That would mean the RYVNX would be up about 60%, given its double exposure, and the RYAIX would be up about 30% since it has a single exposure.  Take your pick, either one will be a good choice.

We are also long the TLT, a long dated Treasury bond fund, an ETF (Exchange Traded Fund, meaning it trades during the day, unlike mutual funds, which can only be traded at the close of trading).  The TLT fund offers exceptional value at the moment and comes with a monthly dividend for those of you interested in such things.  So, while you wait for price appreciation, you have the 4.5% yield to keep you warm at night.

Let’s take a quick look at the upcoming couple of weeks.  On Monday, the LEI (Leading Economic Indicators) are due out and the consensus is for a small drop of 0.3% after being up a big 1.1% in January.  Then on Tuesday, the PPI is scheduled for release and the consensus is for a similar 0.3% drop compared to last month’s increase of the same amount.  The read for “Core” PPI, you know the one without food and energy, is expected to come in a little higher, up 0.2% after being up 0.4% in January.  The world is apparently not focused on inflation numbers these days, along with a whole lot of other things (according to “Boston Legal”).  Thursday brings existing home sales and Friday brings durable goods orders and new home sales.  These home sales figures are important to the Wednesday Update (in case you forgot) so we will be focusing on them.  The following week is the much anticipated Fed meeting.

Be careful out there…

Dow Industrials:  11,279.65  +26.41
RYVNX:   18.62
RYAIX:  21.99
TLT:  88.85
BEGBX:  13.12