Friday, April 10, 2015

Dow Theory Update for April 10: Trends unchanged

More on Gary Antonacci

One gentle reader recommended me this interview with Gary Antonacci. I recommend it to the readers of this Dow Theory blog too.

If I were to forget all about the Dow Theory, dual momentum would be my choice without hesitation. Furthermore, one could have two different portfolios: The first one, strictly Dow Theory based, the second one, as per “dual momentum." Bear in mind, though, that “dual momentum” seems to have deeper drawdowns than the Dow Theory. On the other hand, and even though, its back-tested (not real) track record is much shorter, it seems to extract slightly more profits from the market than the Dow Theory. More about these aspects in a future post.

In the interview, he praises Jeremy Siegel  author of “Stocksfor the long run." He says that it has been proven that US stocks consistently outperform the stocks of other countries.

I agree. I have one reservation, though: Past performance is no indicative of future performance. Most analysts assume that the US will continue to be the best-performing  country as it did in the last 200 years. While I am a trend follower, and hence, if the US is “trending positive” I would never “fade it," as a foreigner, and being skeptical about easy money, I would at the very least consider the possibility that maybe one day the US is not going to be the best-performing  economy (or stock market) in the world. If this were to happen, the Dow Theory (and Dual Momentum too) would come in handy, as:

            a) Negative trends would be spotted by the Dow Theory, thus keeping us out               of  the US Stock market.

            b) Positive trends would be spotted by the Dow Theory in other stock markets (let’s say, Germany). Please bear in mind that the Dow Theory is also applicable to other markets. More about this vital aspect here.

            c) Dual Momentum would prompt us to invest in foreign stocks markets, as it has     done according to the back tests. 

As to the trends: Lull and meandering continues. No changes, and hence I refer to what I wrote in past posts.

Have a nice weekend.

The Dow Theorist.

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