Will Swarts tracks the changes in the Dow Jones Industrial Average component stocks from 1999 to 2009. A worthwhile 10 minute read.

Also, Stephen Moore interviews Detroit mayor Dave Bing in this weekend’s Wall Street Journal. Can Mayor Bing turn Detroit around? He seems realistic about the task ahead, blunt in his answers and willing to make tough decisions. He’ll have plenty to make.

This financial crisis is causing a stir in the Dow 30. The Dow 30 this year is dropping a few well known company and replacing them with other.

GM is replaced by Cisco (CSCO)

Citigroup (C) is replaced by Travelers Group (TRV)

AIG was replaced by Krafts Food Inc (KFT) back in September ‘08

Usually, companies that are removed from an index the stock declines a bit and of course companies that are added to an index the stock gets a nice bounce.

How did I miss this yesterday? I saw the hard bounce off resistance yesterday but did not want to get short until there was confirmation of the down move (previous post). After doing some homework this morning I noticed the formation of these double-top has been followed by hard sell-offs. In the chart below we see the rallies from Societe General lows (1), Bear Stearns lows (2), then Fannie/Freddie bailout lows (3). Each sell-off has brought us at least to the previous low, or beyond. I can only assume the same will happen this time. I’ll be looking to enter SKF this morning, and also be looking at the DOW 30 ultrashort.

I’ve been away from the computer for most of the day but I’m keeping a keen eye on the financials. Each time they break down, they make new 52-week lows, so I load up on SKF. This is the ultrashort, 200% inverse of financials. I like this play because it is very sensitive to the sectors moves, and it doesn’t risk a margin call as in the case of individually shorting a stock.

We saw a big decline in the financials sector lead by more record write downs by AIG. Although it would have been nice to be in on today’s big move in SKF, I’m waiting for confirmation of the larger up move towards 150, then 200. Over the last week or so we have been in a tight trading range (111-127). Before I get long I want to see us break out of here, over 127.50 and I’m a buyer. This breakout will likely coincide with the dow breaking under 11,144, the last break low. The dow looks to have tested the 11,700 level for the second time, otherwise known as a double top.  I don’t think we have the legs to get through this level even if we reverse, so look for more downside. Critical levels are marked on the charts below.

Still watching the dollar and gold. In my previous post I mentioned 845 as my projection for the low in gold. I realize I cannot pick every bottom correctly and it would be a shame to miss this next leg up. So I will be looking to buy some beat-up miners when we pass 860. We are very close.

Here are two charts, the DOW index and SKF (ultrashort financials). What I’m watching is a safe level to go short the financials, in other words an entry point for SKF. I know SKF will return to the 200’s but I don’t want to tie my money up for too long. I’m waiting for the uptrend to be confirmed.

The definition of an uptrend is higher highs, and higher lows. When a previous break low is taken out this cancels the uptrend and it must be reestablished. Same is true with rally highs. If the previous high is not taken out, the upward trend is not confirmed.

In the case of the dow, our last break low is in the 10600. We are not going to reach that point today or monday, but when we do I think we should make our way past previous lows. This is crucial for setting up my SKF purchase since the finanicals are heavily weighted in the dow index.

On the skf chart you can see that we recently put in higher lows. We need to get over the 145 area to confirm the uptrend. Although I could purchase here and set a stop at the last break low, I’d rather not tie up the cash for now.

The critical points are circled below.

As we learn that the U.S. has lost 438,000 jobs since January, we’re also hearing about a winner in the downturn: business schools. Linda Livingstone, dean of Pepperdine’s Graziadio School of Business and Management, tells me that she’s seen a 29% increase in applications for her school’s full-time MBA program this year.

The draw is more than the Malibu surf. (Pepperdine’s campus, in the Malibu hills, overlooks the Pacific.) Interest in MBA programs typically goes up during recessions. The Graduate Management Admission Council (GMAC) reports that applications to MBA programs nationwide are rising (applications for full-time MBA programs were up 36% this year from last year) as applicants look to enhance their resumes or pursue career changes—at least until companies start hiring again.

I also checked in with Wendy Kopp, the founder of Teach for America, whom I profiled last year. Kopp says that applications to TFA have increased 36% this year. If anything, the downturn is showing today’s young talent that the best route to success may be the patient one.

P.S. Last week, I wrote about Starbucks (SBUX) hitting the wall on growth. Meanwhile, Wal-Mart (WMT) is reviving. It’s the best-performing stock in the Dow 30 in the past year. So who else is doing well these days? Dollar Tree (DLTR), the deep-discount retailer, is thriving on penny-pinchers; the shares have risen 43.9% this year.