Sunday, July 24, 2016

SDY Dividend ETF Weekly Chart Dividend Stock Bubble Expands

The central banker intervention continues to create the bottoms in stock charts and prices remains above key moving averages verifying the never-ending Keynesian intervention. Traders don rose-colored glasses. Waiting for the dividend stock bubble to pop is like waiting for Godot. Keystone has been posting the SDY and DVY charts for the last couple years chronicling the top in the bubble but dividend stocks will not roll over.

This year, a new leg of life is breathed into the beast with more Fed, ECB, BOJ, PBOC and other central banker easy money. The bottom four weeks ago where SDY bounces off the 20-week MA support now at 81.23 was created by the BOE that came in to the markets promising boatloads of stimulus to save the day after the Brexit vote. The central bankers are the market and have been since early 2009.

Investors are chasing yield and perceived safety in dividend stocks especially over the last six months. Uncle Frank, and Granny Nell, that lives in the small bungalow at the edge of town, both took their entire life savings and bought dividend and utility stocks last week just like the nice young man on television said to do. People are going to get hurt badly.

The red lines show negative divergence in the near-term, and over the longer term, except for the MACD line that is running to the moon now in nosebleed territory. The long and strong MACD will want another higher high in price after a pullback in this weekly time frame. That top, say anywhere from one week to three months out, should be the final act in the dividend bubble saga. The monthly chart is very similar only showing 1 to 4 months more of juice available to allow higher prices.

If central bankers keep pumping, that may keep the party going. This week the FOMC announces its rate decision on Wednesday but there is no expectation of action. More importantly, the BOJ has promised more easy money juice and the NIKK and other global stock markets have rallied so the Bank of Japan had better deliver the goods on Friday or there may be some hari-kari going on. BOE Governor Carney goosed the FTSE and global stock markets to save the day after the Brexit vote promising mountains of stimulus to begin in August so he had better deliver a brand new shiny pony as well next month

That big intraweek spike lower in August 2015 on the chart was during China Black Monday on 8/24/16 when the Shanghai Index, SSEC, fell -8%. The Dow dropped nearly 1,100 points at the opening bell but recovered quickly since central bankers always save the day.

The ADX shows a strong uptrend in place in 2013-2014 that petered out in late 2014. Interestingly, dividend stocks stumbled sideways for over one year and the ADX shows that the sideways trend was a very strong trend. Then, as 2016 began, the sideways trend was not strong and price broke up above the sideways blue channel and the divvy bulls never looked back. The recent trend higher in price, however, is not a strong trend with the ADX moving down to 20.

Aunt Agnes just called; she said she took her life savings and bought telecom and dividend stocks last week. Agnes said the guys on television guarantee huge gains in dividend stocks and she does not want to miss the train leaving the station. She would be better served if she cashed in her ticket and did not get on the train.

The dividend stock bubble grows but the projection is for a significant multi-year top to occur at anytime over the next three to four months. Interestingly, that places markets in the ominous October time frame. Price should seek the middle band at 81.23 and climbing and the lower band at 76.43 and moving higher is also a target. It would not be surprising to see SDY down in the 62-74 range one year from now. The same technical analysis holds for DVY and for many individual dividend stocks. Watch that MACD line; as soon as it rolls over it will likely take the whole enchilada lower and begin a multi-month and multi-year slump lower for dividend stocks and the broad stock market. Those running into dividend stocks with reckless abandon are going to likely regret the decision when they look back one year from now. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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