Monday, December 26, 2011

Dow Jones Utility Index: The Pursuit Of Yield Continues

From Olsen Global, as I have written about 3 or so years ago dividends will become more sought after in the search for Yield.  Aivars Lode
Happy New Year !!   Ted
As 2011 comes to a close, it is clear that the pursuit of reliable
yields persists. As noted in previous alerts, a bullish reverse Head &
Shoulders pattern on the Dow Jones Utility Index (DJU), which is
eerily similar to one that developed back in 2002 and 2003, continues
to play out to the upside. With nominal interest rates at much higher
levels during 2002 and 2003, the beginning point of the previous
reverse Head & Shoulder pattern was from much lower price levels.
At present, short-term interest rates are expected to stay near zero
for at least the next 18 months. Moreover, “operation twist” continues
to force yields on longer-term treasuries to ever lower levels. As a
result, conservative investors, retirees as well as pension managers
are finding dividend yields on a wide array of utility shares
appealing. The prospect of capital appreciation adds to their luster.
The “objective” of the current bullish reverse Head & Shoulders
pattern remains at the 525 level, which suggest that a 13.4% rise in
the DJU index is technically expected to be achieved from Friday’s
While the outlook for utility prices remains promising, a general
concern that an unexpected rise U.S. interest rates, as well as a rise
in other nations’ sovereign debt yields, could derail the present
optimism for utility shares. A change in the treatment of dividends
from a tax point-of-view could also become a much bigger issue in
For now, however, the Dow Jones Utility Index appears to be headed for
much higher levels as revenue strapped investors try to find
conservative sources of income. 
Jim Donnelly, Olson Global Markets

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