Divvy Bubble Trouble or Divvy Safety Play for 2012?

Traders are chasing into dividend stocks as a place to hide.   But, when you look around and realize that everyone is hiding in the same place you are, that should tell you that the hiding place is probably no longer a hiding place. The 4 to 6% divvy yields are more attractive than Treasuries. Healthcare, pharma, consumer staples, utilities, energy and telecom divvy stocks are receiving a large boost.

The media pundits and other shills are pumping the dividend plays these days, they say 'hurry up and buy before its too late!'. This action is typical of where the larger funds and hedgies need Joe Sucka to show up with his bag.  With some of these moves over the last few days, on shameful low volume, Joe Six has to have jumped in, probably proudly bragging to everyone at the family Christmas party how smart he is to now be fully invested in dividend stocks.  Joe does not realize he will be holding that divvy bag in 2012.

The divvy stocks are experiencing a wild orgy of upside action. The toga party includes upward moving dividend index funds such as DVY, VIG, SDY or MRDVX, which may contain individual names such as CVX, MCD, WMT, PG, KO, JNJ, MRK, LLY, PFE, T and XOM. The previous charts discuss DVY in detail showing the negative divergence in place now forecasting sideways to sideways down price action for the forseeable future.  The divvy bubble is a sneaky bubble devil. Other bubbles such as the dot-com bubble in 2000, the commodities bubbles in summer of 2008 and again in summer 2011, the housing bubble that popped in 2005, and the financial bubble that popped in early 2007 were much easier to forecast.  Even the gold bubble this year was easy to spot.  The long term slow creep higher shown in the DVY weekly charts now results in prices at nose-bleed heights.

T is the biggest divvy stock available and may gain another buck to test the highs at 31 but negative divergence should seal its fate.  XOM is another heavy divvy hitter, the recent pop higher will be remedied as well in the weeks ahead due to its negative divergence.  CVX is a sick pup, despite this six day explosion higher, the negative divergence on daily and weekly charts pointing the way to a short entry right now.  The others are not attractive either; MCD, WMT, PG, KO and JNJ all stocks that are topping as the new year begins singing their final swan song.  The one group that requires some praise, however, is MRK, LLY and PFE; they do show some extra momo power.  They will eventually set up negatively just as the other divvy stocks, however, but they will lag as the others roll over first.

The underlying strength of any bubble mania is a tough thing to reverse but once it does, the floodgates open as the August sell off shows.  The projection overall is that divvy stocks are in a bubble. If the word bubble bothers you, call it a significant top instead.  The projection for this entire genre of dividend stocks is sideways to sideways down for the foreseeable future. The pharma divvy stocks will spend some additional time topping before they join the others and roll over as well.

Keystone is assembling the 2012 forecast and assessing the 2011 predictions currently. This will be posted on the weekend as the year changes.  Divvy stocks will more than likely take a place in the 2012 predictions list with a pull back likely forecasted for dividend stocks early in 2012. After that, perhaps quantitative easing will save the day again, but for the start of the new year, taking one step at a time, dividend stocks are topping now and should move sideways to sideways down for the foreseeable future, marking the current action as a significant top.