The Shepherd Investment Strategist - A Service of JAS MTS Inc: "First of all, as I have pointed out in a number of voice updates, the makeup of the DJIA has been changed since just after the model’s sell signal and during the bear market in stocks that signal predicted. In late 1999, only a week after the sell signal, Chevron, Goodyear Tire, Sears Roebuck and Union Carbide were removed from the index and replaced by Intel, Microsoft, Home Depot, and SBC Communications. Later, in April 2004, International Paper, Eastman Kodak and AT&T were replaced by Verizon, AIG and Pfizer. The effect of these changes has been substantial. Although we cannot precisely measure the complete effect of these changes, due to the fact that some of these previous components were taken over by other companies or taken private, we can easily see the differential between some of them compared to the replacements.
For example, Sears (not the same company that is a holding company for the stores now) fared much worse from high to low in the bear market than did Home Depot. In fact, Home Depot was a big beneficiary of the-borrow- to-remodel boom that went along with low mortgage rates. Goodyear Tire did abominably after the market peaked in January 2000, much worse than any of its replacements. Later on, the old AT&T (not the company combined with SBC, named ‘at&t’) did far worse than any of its replacements, falling dramatically from its highs and never really recovering. The same obviously goes for Eastman Kodak and to a certain extent International Paper.
So, the question must be asked: is the near new high on today’s DJIA representative of an actual new high in the stock market? This is especially important to ask, since the latest changes in the index took place within the timeframe of the sell signal in the model. If you look at the facts"
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