Dow Jones Industrial Averages & Global Markets "Flexing Muscle”

... These were the new financial headlines this morning - by the same "financial professionals" when exactly one entire day prior, (yes, yesterday/ 24 hours ago) they exclaimed, "Stock Market Outlook Gloomy", "Recession and Correction Near", "The Fed May Lower Rates" (huh? what's the other 50% of the probability forecast?!) etc, etc ... With the similar impulsiveness we simply respond, "Drink ethanol and let solar shine!"

Forget the fair-weather zealots' headlines. Rely only on the facts, whether the trend is currently up or down, and starting today we'd rather focus on Earnings Season which are currently underway. This is the catalyst that will determine the market's direction and where individual stocks really go next.

On that note and speaking of facts, Wal-Mart Stores, Inc (WMT) the world's largest retailer, was one of the first DOW components on Thursday to report earnings. Plainly put, they were somewhat favorable and furthermore WMT has increased its profit outlook lifting market optimism about its earnings. The stock seems to have found a bottom at approximately $42 and seems to have reversed from a previous down trend since mid September. All that said, we're BUYING it here.

We continue to stand by the statement made in our DeanJonesTrader blog back on September 13th (days before the Fed lowered rates), and we are also BUYING here the following for our Dow Jones Trader Portfolio (DJT):

AIG - American International Group, Inc

DIS - Walt Disney Company

PFE - Pfizer Inc

WMT - Wal-Mart Stores, Inc

Click below to enlarge and view current Dow Jones Trader Portfolio (DJT) positions:

DJT Portfolio Up +27% YTD

Third Quarter Report Card

Hard to believe we are entering the last quarter of 2007. While the major financial headlines are back to flashing, "Investors Ponder the Fed's Next Move", and professional financial managers are making cerebral statements such as, "We're trying to read the tea leaves of what they're going to do on Halloween" (no joke), we instead will keep this blog honest and simply broadcast the facts with our end of quarter results.

In the third quarter; Dow industrials were up 3.6%, Nasdaq up 3.8%, S&P up 1.5% and our Dean Jones Trader Portfolio edged up 8.3% hitting an overall record high. (See 3-month chart below)

With a sense of relief knowing we remain at +25.4% for the year and following a challenging summer with a Wall Street correction, we can now start focusing on this upcoming 4th and final quarter of 2007.

But prior to doing so I will respond to the several e-mails and questions received which basically ask, "how can this Dean Jones Trader Portfolio be ahead for the summer, after knowing it was the worst past two months on Wall Street since 2002?" ... The answer remains quite simply, because we locked-in some gains by shedding the portfolio from several stocks and particularly all the financial stocks, keeping only the defensive plays while riding out this downward trend. (Furthermore one can also read this blog's previous entries back to June 2007 until present for details).

To highlight this fact, the 3-month performance chart above clearly illustrates that at the time the S & P 500 suffered its second-biggest plunge of the year (second half of July through August), our DJT Portfolio more or less leveled off during the same time period.

Ironically, last month was also the best September on record since 1992. Therefore the question remains, where were all those "professional" tea leaf readers back then?

When Interest Rates Fall, These Go Up +25%

TODAY'S DOW JONES TRADER PORTFOLIO FACT$:

1. Coca-Cola Company (KO) Hit a 52-week high: $57.68

2. Procter & Gamble (PG) Hit a 52-week high: $70.73
3. Our DJT Portfolio hit a new year high at +25.4%

Last Tuesday, we got the biggest buy signal since November 6, 2002. When we received that buy signal, the Dow closed at 8,771. That market trough coincided with the last time the Fed cut interest rates by 0.5%. Since then, the markets have done extremely well and that buy signal kicked off a five year bull market.

... But, while the Dow (overall) has returned a mere +57% since that time, there have been a lot of much better performing stock investments. Two of the best performers since that time were Energy and Health Care. Since the bull market began on October 9, 2002, the FACT is that only 18 of the 500 stocks in the S & P 500 Index have seen their share prices decline during this bull market run.

Can this time be different? Of course it can, but we're betting that long term stocks will rise handsomely and short term we intend to maximize our returns by riding overall market momentum and individual stock trends.

FUN $ FACTS:

The best performing current S&P 500 stock since the bear market began on March 24, 2000 is: XTO Energy (XTO) ... Which leads the top 25 list with a whopping return of over +2,188% ! The worst? ... JDS Uniphase Corp. (JDSU) ... it has fallen over -98.9%.
(We say, "Let bad dogs lie ...")

Fed Cut Rates and We're Up +24.6% ...

While Wall Street hails central bank's decision to cut the fed funds rate by a half-percentage point, we hail to Sam Adams and the ongoing performance of our Dow Jones Trader Portfolio.

That about sums it up! ...

The past several weeks of infinite media speculation and lingering financial analysts reciting crystal balled forecasts in unison all came to an abrupt end at 2:20 PM (EST) ... and like a sling shot, the Dow shot up +335.97 (+2.51%) as the market welcomed the news of the surprise rate cut. On a percentage basis, the Dow added 2.5 percent, its best one-day gain since April 2, 2003, when it gained 2.67 percent.

Last Thursday we did state our indicators pointed to a trend reversal for the first time in awhile, and coincidentally at 2:20 PM today our Dow Jones Trader Portfolio did profit from the Fed's half point decrease with the 4 new positions we purchased.

Additionally, today we also increased our holdings by adding the following two new positions;

American Express Company (AXP) and once again, General Electric Company (GE), which the stock broke-out and just hit a new 52-week high along with PG. Worth noting here, we have now gone from 6 stock holdings to 12 in less than one week.

Below is a complete portfolio list of all our holdings:

YTD % Change:

DJTP ........... +24.6%

S & P 500 ..... + 7.16%

NASDAQ ........+ 9.79%

FUN $ FACT: ... And for shits and grins, when we say ALL "media speculation and lingering financial analysts reciting crystal balled forecasts in unison all came to an abrupt end at 2:20 PM", we really meant that! The charts below illustrate a Wall Street phenomena which is rarely seen ... I guess you can call it "the power of the Fed!"... This Dow 30 snapshot was literally taken less than 30 seconds into the decision announcement to cut the fed funds rate by a half-percentage point...

Sodas, Burgers and Dirty Diapers ... and 4 New Buys

As of Thursday these two blue chip stocks, Coca Cola (KO) and McDonald's (MCD), were the best one month performers on Wall Street, and meanwhile Procter & Gamble (PG) just hit its 52-week high at $67.72 soon after the ringing of the opening bell.

When we sold off more than half of our portfolio holdings back in early August to protect our profits (from 15 to only 6 stocks!), we kept 2 of the 3 above mentioned companies in our Dow Jones Trader Portfolio, and today we are benefiting from their new record highs with a gain of +22%.

While almost all the financial talking heads and experts have been too busy for sometime debating whether the "Fed" will lower its benchmark rate or not come Tuesday September 18, the "trend" simply kept us invested in what many refer to as the boring defensive stocks ... In other words, the current sub-prime crisis presumes a doomsday scenario where if people continue to lose their homes and land in the streets, chances are they will still consume a $1.00 Big Mac, supersize on a diet Coke, slap-on some shiny white Pampers diaper on their bottomless kid ... and then spark up a Marlboro while fueling up their SUV at the pumping station.

(In case you're wondering, the ticker sequence to this award winning apocalyptic film would be; MCD, KO, PG, MO & XOM)

On a more serious note now … interestingly today, for the first time since early summer 2007 the stock market confirmed a trend reversal for several of the DOW component stocks - shifting from a negative trend to a positive.

Whether this trend reversal is real or setting up to be a fake-out, it remains to be seen. This type of action is personally more interesting than whether come next Tuesday Mr. “Fed” Bernanke will show up in a Disney or Wal-Mart tie. The timing can also prove to be lucrative.

Having said that we now finally commit some of our 50% cash to work in buying some positions.

For now we are establishing positions in:

C - Citigroup, Inc (NYSE)
JNJ - Johnson & Johnson (NYSE)
MCD - McDonald's Corporation (NYSE)
MSFT - Microsoft Corporation (NASDAQ GS)

Bulls Charge But Dow Down -10% In One Month

This market can be labeled as a classic textbook "correction". In the recent market sell-off our technicals got us out of Hewlett-Packard (HPQ) the same day before the company released earnings at the market's close. Unfortunately the stock rallied the following day (along with all the others in the stock universe!), but until we return to a confirmed rally, capital preservation now rules and prevails over capital appreciation ...

That said we are currently at 50%+ in cash, and our Dow Jones Trader Portfolio today is up +20% for the year. Considering the latest Wall Street stampede, this portfolio's performance provides additional motivation to stay the course as we are well into the second half of the calendar year.

Dow Jones Trader Portfolio (DJTP) Year To Date % Change as of 8/17/07:

Subsequent to Friday's rally, the Dow Jones Industrials are still off 1,000 points for the same month. It would be entirely in this market's character to follow Friday's euphoria with another fire sale next week or next month ... And as horrible as August has been, historically September is the worst time of the year on Wall Street for average monthly performance.

Got Bull?

"Be fearful when others are greedy, and greedy when others are fearful."
- Warren Buffett