Elliott Wave InternationalmyEWISocioniomics.Net
Home > Stocks

Dividend Yields: A Major Sign of the Long-Term Trend in Stocks
Today's chart illustrates how dividend yields have earmarked significant tops and bottoms over the last century

By Nico Isaac
Tue, 14 Jun 2011 15:00:00 ET
Add to Facebook Add to Twitter Email to a friend Printer Friendly

The only time that fundamental analysis of financial markets doesn't make sense is those parts of the week that end in "day." (Idea borrowed from a famous Warren Buffett quotation on when to buy junk bonds, i.e. Never)

Take, for instance, the slew of news items below discussing the recent price action in the world's leading stock index, the Dow Jones Industrial Average.
  • On June 10, the Dow finishes its sixth straight week of decline. This is the market's longest losing streak since 2002. Says one media source: "With few economic reports on the horizon this week, there's little that could give the equities markets a jump. I don't see any catalyst that could help reverse this trend in the coming days." (The Epoch Times)
  • "In the coming days," however, the Dow reversed its downward course to enjoy a powerful triple-digit climb on June 14. "US Stocks Rose Sharply," began a Wall Street Journal. "The market was aided by a reading on US retail sales that wasn't as bad as economists' expected."
 Then the tables turn once again on the whole good-crude-oil-cop/bad-crude-oil-cop debate:
  • On June 10: "Stocks Adrift As Traders Digest Renewed Bullish Calls On Oil." (Forbes)
  • VERSUS this June 14 post: "Wall Street Set To Open Up On Commodities' Gains. US stock indexes pointed to a modestly higher open as stronger oil prices led a rebound from the previous session." (Reuters)
When it comes to participating in financial markets, consistency should not be a luxury. It should be a necessity. For Elliott Wave International's analysts, the goal is to find those technical indicators that continually stand the test of time in their ability to signal major turning points in the key indexes.
One of those indicators is the dividend yield. Since... well, forever, investors accept low dividends at market tops in the belief that stocks have much higher up to go. The opposite holds true near bottoms, as investors demand high dividends to offset the perceived risk in stocks.
In his 2002 NY Times business bestseller Conquer the Crash, Prechter reinforced this discovery via the following close-up of the DJIA versus dividend yields from 1915-2000:
NOW -- the June 2011 Elliott Wave Financial Forecast revisits this powerful indicator with a mind-opening close-up of the Dow versus dividend yields from 1930 to TODAY. One look at this chart and you will see whether a lasting bottom has been reached.
PLUS, when you subscribe, you'll get instant access to Chief Market Analyst Steve Hochberg's NEW 42-minute subscriber video, "Three Historic Peaks in the Financial Markets -- And What It Means To You." You'll get an intensive, eye-opening look at the development of the greatest financial top of all time -- one that encompasses stocks, crude oil, commodities, gold, property prices, junk bonds and more.

Rating: - based on [18 rating(s)]
Rate this content:

FFSEWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:
  • Short Term Update -- Intensive forecasts and analysis 3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
  • Financial Forecast -- In-depth, intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
  • Theorist -- Bob Prechter's monthly big-picture insights.
Get complete details and start your risk-free trial today >>
Free Video Course
Learn the Why, What and How of Elliott Wave Analysis

Financial media use news and economic events to explain market moves. Steer clear of this misguided approach. Take part in the Elliott Wave Crash Course to learn what really moves the markets.

© 2016 Elliott Wave International
TRUSTe online privacy certification

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.