DIVIDEND ISHARES BREAK OUT -- FALLING BOND YIELDS ARE ONE OF THE REASONS WHY -- PROCTER & GAMBLE IS LATEST STAPLE BREAKOUT -- WALMART IS ALSO ATTEMPTING A MAJOR BULLISH BREAKOUT -- AT&T EXCEEDS ITS OCTOBER HIGH -- REIT ETF NEARS UPSIDE BREAKOUTS
DIVIDEND ISHARES HITS THREE-YEAR HIGH ... One of the consistent themes that we've written about since the spring is the rotation toward large dividend-paying stocks. Many of those stocks are also in defensive stock groups that include healthcare, staples, and utilities. There's no sign of that trend ending. Chart 1 shows the DJ Select Dividend iShares (DVY) breaking out to a new 52-week high. That puts the DVY at the highest level in three years. Its relative strength ratio (above chart) is doing the same. The RS line starting rising during the first quarter (first arrow) and got another big boost during August when the stock market peaked (second arrow). In my view, there are at least two factors at work in this year's move to dividend-paying stocks. One is the fact that the stock market started to peak during the spring and fell heavily during the summer. The other is that bond yields have been falling all year. Chart 2 compares the 10-Year T-Note Yield (green line) to a ratio of the DVY divided by the S&P 500. Notice the inverse correlation between the two lines in Chart 2. Falling bond yields starting during first quarter (and even moreso during August) forced investors to look for "yield" in dividend-paying stocks. The fact that many of those stocks were also defensive in nature simply added to their appeal.
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Chart 1
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Chart 2
PROCTER & GAMBLE BREAKS OUT ... A number of stocks in the consumer staple sector have achieved impressive bullish breakouts over the past few months. Some that we've shown include CVS, Walmart, Kraft Foods, and Tyson Foods. One that caught my eye today is Procter & Gamble. Chart 3 shows the staple leader trying to break through its 2011 high around 66 (see line). That's only part of the test going on. Chart 4 shows that PG is also testing its all-time closing high at 67 that was formed at the end of 2007. A close above that major barrier would be an impressive breakout. PG also happens to the be most most heavily-weighted stock in the Consumer Staples SPDR (XLP).
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Chart 3
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Chart 4
WALMART TRADES AT HIGHEST LEVEL IN A DECADE... The monthly bars in Chart 5 show Wal Mart (WMT) also on the verge of achieving a big bullish breakout. The stock is trading just above its 2008 intra-day high at 59.21 in today's trading. A close above 60 would put WMT at the highest level in more than a decade and in position to challenge its 2000 peak at 61.27. Wal Mart's relative strength line turned up this spring along with the rest of the staples group (see arrows).
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Chart 5
AT&T CLEARS OCTOBER HIGH ... In the telecom sector, I recently showed Verizon breaking out to a new record high. Although AT&T has lagged behind, it too is starting to gain some attention. The daily bars in Chart 6 shows AT&T rising above its October high at 29.80. That puts the telecom giant in position to move up toward its spring and summer high. What the stock does from there is very important. The monthly bars in Chart 7 show that a decade-long resistance line drawn over the 2000-2007 highs resides right around the same 31 level. The fact that Verizon (top of Chart 7) has already reached a new record high may be hinting at better times for AT&T as well.
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Chart 6
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Chart 7
REITS TURN UP ... Real Estate Invesment Trusts (REITS) are another defensive sector that investors often turn to in the search for dividends. Chart 8 shows Realty Major iShares (ICF) moving up to challenge its October high near 70. An upside breakout appears likely. Its relative strength line (below chart) has turned up as well. REITS dominate today's leader board in the financial sector.. One of those leaders is Boston Properties (BXP). Chart 9 shows the stock breaking through its November peak near 100. A number of individual REITs are trading at new records. One of them is Simon Property (SPG). Chart 10 shows the stock hitting a new record today. SPG is also the biggest holding in the ICF. The message in all of these charts included in this message is essentially the same. Despite the December gain in the major stock indexes, investors are still favoring defensive stock groups that pay dividends.
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Chart 8
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Chart 9
