Would You Purchase This Security?

Update on $SPX's Exponential Moving Average Strategy

Why Today's Market Euphoria?

 Let me count the ways.  First, the House passed the "Clean Debt Ceiling" bill.  What?  If this bill is approved by the Senate, the U.S. will be able to spend as much as it wants until March 15, 2015.  Yes, we will no longer have a debt ceiling.  Our national debt is currently north of $17 trillion.  That figure can now grow exponentially over the next year.  So much for any fiscal conservatives in Congress.  Second, Janet Yellen proclaimed that the easy money policies of her predecessor, Ben Benanke, will continue.  And, there you have the two reasons (fiat money and more fiat money) for today's euphoria.  From the above chart, you can clearly see that the "euphoria" does not end well!

Student Loan Debt

The average debt load for the class of 2012, latest available, was $29,400, according to the "Institute for College Access & Success' Project on Student Debt."  This is up 10.5% from the class of 2011. Now, that is a lot of debt for someone going into today's weak job market.  A good site to visit to learn about student loan basics and interest rates on those loans is at American Student Assistance.

Let's go back and look at what the monthly payments would be for that average debt loan of $29,400 at 6% for 10 years.  According to my calculations that monthly payment is $326.  Now, what happens if that student defaults on that loan.  If you default on a student loan there are statutory penalties, retroactive interest and fees that get added to the outstanding principal balance, since these are all federally-guaranteed, and those penalties and fees frequently run to 50% of the outstanding balance.  If you default on $29,400 of student loan debt, you now owe $44,100, not $29,400.  And, of course, you can't discharge any of it in bankruptcy.

Do Dividend Yields Really Matter?

In the latest edition of the "Elliott Wave Financial Forecast (February 7, 2014)" states as follows: "For instance, few currently perceive any risk conveyed by the DJIA's dividend yield of just 2.09%.  A false sense of complacency may be due to the fact that for all but 5% of the time over the past 20 years, the DJIA's yield has been under 3%.  Historically, however, a 3% DJIA dividend yield attended stock market peaks.  Between 1915 and 1994, the dividend yield remained higher than 3% for all but one brief moment, in 1987, and that reading preceded a stock market crash."

And, there you have it!  Historically, dividend yields do seem to matter.  Today, we are at the junction again with the DJIA's dividend between 3%.  Will the consequences be different this time?  I believe not, but, then again, we shall so find out!

$INDU: Retracement to 15,750?