No stopping now, not nohow? It’s beginning to look that way. Stocks rocketed again yesterday, with the Dow Jones Industrial Average now up more than 800 points from its June 15 closing low.
Odds are still 50-50 the market will give us a significant retracement as July wears on, but the extreme strength over the past eight sessions introduces another equally plausible scenario: We may just have drawn what Monopoly players know as an “Advance Token to GO” card.
Usually, before launching a sustainable, months-long advance, the market needs to build a more extended base than the one we got in June. Every once in a while, though, stocks blast out of a narrow base and never look back.
The last such instance came in March 2009, and before that, September 2001. So we’re talking about a pretty rare phenomenon.
If the market is, in fact, going to head higher without a meaningful pullback, we can expect the speculative froth to build up quickly. Already, put/call ratios are plunging and surveys of investor sentiment are registering a spike in bullishness.
The next stage would bring a rash of dubious initial public offerings, heavy insider selling and other signs of stock being distributed from the wise to the foolish. Let’s hope these events don’t unfold too quickly, because they could spell an early end to the bull market.
As I say, the jury is still out on which path the market will take. Nonetheless, with the “Advance Token to GO” scenario now a real possibility, I advise you to approach any new purchases with heightened caution.
Enjoy your profits as they pile up; celebrate and cheer them. But keep in mind my year-end target for the S&P 500 is 1,385-1,435. The midpoint of that range, 1,410, is a mere 4% from here. Only the safest stocks (and mutual funds) deserve your attention now.
Among the individual stocks we’re following, Cellcom Israel (NYSE: CEL) stands out as a top value. For some reason not entirely clear to me, Yahoo Finance lists the company’s annualized dividend rate as $2.69 per share. Perhaps Yahoo is deducting the 20% Israeli withholding tax, but in my experience the website normally quotes foreign dividends before tax.
Fact is, CEL is paying $3.36 (pre-tax), based on the most recent quarterly dividend; $3.64, based in the sum of the most recent four quarters’ dividends; and $3.10, based on my conservative estimate of all calendar-year 2011 dividends (past and future).
CEL’s dividend fluctuates from quarter to quarter, depending on the wireless carrier’s profits. If you’re the kind of person who gets unnerved by this kind of movement, steer clear of the stock.
As for me, I own a substantial slug of CEL, and I’m thrilled with the 11% yield (per my dividend estimate).
