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The 30-stock secret: ‘Don’t fight Papa Dow’

JC Parets, founder and chief strategist at All Star Charts, explains why fighting the Dow Breadth is futile and how embracing the approach can simplify your market analysis significantly.

He spoke with Yahoo Finance’s Jared Blikre and Sydnee Fried on "Stocks in Translation." Listen to the full episode here, or wherever you get your podcasts.

This post was written by Jared Blikre

Video transcript

You know, I learned from Ralph Akora.

Shout out, Ralph Ako used to say JC, don't fight Papa do, don't fight Papa do.

And you know what I used to do, I used to fight Papa do all the time because I thought it was too cool for school and boy, I was dumb and ignorant.

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Let me tell you something.

These are 30 stocks.

It's very, very, if you want to know the direction that the market is going in, up, down or sideways, look at those 30 stocks.

That's it.

Are more of them going up, are more of them going down or are they going sideways right there?

Very simple.

30 stocks?

Ok. Ok.

But is the way that it's calculated outdated?

You know, this is one of those things where in theory, maybe it is but in practice it isn't right.

You know what I'm saying?

You know, if you overlay the S and P 500 in the Dow Jones industrial average, take it back to the beginning.

What was 1957?

If my calculations are correct for S and PS, how am I doing for the 500 or somewhere in there?

Yeah.

So calculate and put both lines over each other, put them in different colors and you won't be able to tell me which ones which I know.

I certainly couldn't.

Right.

Maybe if I look close, I could figure it out.

But I literally do this for work.

But like, you know, nobody's gonna know the difference.

They go up together, they go down together.

So if you want to know the direction of the market, you got 30 stocks.

Listen, you could be crazy like me and go through all 500 or all 3000 and we do that too.

But if you, if you don't have the time to do what we literally do for a living 30 stocks, that's it.

Once a week, Saturday morning, Friday night, Sunday morning, Monday morning, whatever your routine is, go through those dirty stocks.

Are they going up?

Are they going down?

Are they going sideways and you're gonna be, have a good idea of the overall direction of the market?

And let's remember something.

Why do we do this?

Because we know for a fact that asset prices trend, right?

It's not random.

It might seem random but it's not asset prices trend.

We know we have the math.

So if we know that, then why wouldn't we want to spend time and attention looking for trends?