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Jeff Saut: Did the Dow Flash a Buy Signal?

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The only way to buy right here is with a short-term downside hedge.

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Editor's Note: The following article was written by Raymond James Chief Investment Strategist Jeff Saut. It has been reproduced with permission for the benefit of the Minyanville community.

Obama's health-care plan, as currently proposed, is DOA (dead on arrival): There are too many political, corporate, and popular objections to such a plan, which was why it was delayed last week. Maybe that's why some of the health-care stocks sprang to life.

And many of the smaller banks have nefarious off-balance-sheet items that are going to be brought back on to the balance sheets, thereby causing numerous bankruptcies. Accordingly, one should be very selective on financial stocks.

While the President's health-care setback was a major topic of the week, by far the most common question I received was about whether a Dow Theory Buy Signal was registered last Thursday. Consequently, I would say:

If you listen to Richard Russell, longtime keeper of Dow Theory, that was indeed a buy signal. Indeed, Dick Russell is using the June closing reaction highs of 8799.26 (June 12), and the June 11 close of 3399.88, for the DJIA and DJTA, respectively.

He observes those levels have now been bested and therefore has replaced the bear figure at the top of his market letter (it has resided there since December 16, 2008) with a bull figure.

I have a great deal of respect for Dick, having read his missives on and off since 1971. I particularly remember his brilliant call on the beginning of a new bull market in December of 1974, when he targeted the low and opined that the bull market would be led by the steel stocks. That was indeed prescient, as US Steel (X) gained nearly 300% over the next year.
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No positions in stocks mentioned.
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