Archive for the ‘Dow Jones Industrial Average’ Category
Dow Jones Industrials Looking Good, But Transportation Leadership Has Vanished
By Mitchell Clark, B.Comm. for Profit Confidential
Stock market breadth isn’t that strong, and what’s worrisome from my perspective is the non-confirmation from the Dow Jones Transportation Index. One stock market leader that I always follow is Union Pacific Corporation (NYSE/UNP), which is a railroad stock that just hit an all-time record high on the stock market of $126.91 per share. This is one component of the Dow Jones Transportation Index that’s doing great, but a lot of companies within the index haven’t participated in the recent rally, and it’s a real divergence.
Of course, oil prices reversed their earlier trend and recovered significantly from below $85.00 a barrel. Certainly, this would be a drag on the index. But the Dow Jones Transportation Index has mostly led the Dow Jones Industrials and the S&P 500 Index since the stock market low in March of 2009, so the divergence is a red flag as far as I’m concerned.
A lot of institutional investors are not behind the recent stock market breakout, citing less than inspiring economic fundamentals and a mediocre technical picture. But for all the analysts now calling for investors to sell their equities, the stock market remains fairly priced, given the earnings outlook. Fundamentally, there’s nothing wrong with the Dow Jones and the other benchmark indices at their current levels.
Stocks that have been breaking down in the Dow Jones Transportation Index include J.B. Hunt Transport Services, Inc. (NASDAQ/JBHT), United Parcel Service, Inc. (NYSE/UPS), and Landstar System, Inc. (NASDAQ/LSTR) to name a few. (See “Why Getting the Business Cycle Right Is the Only Thing That Pays.”) It very well could be the oil … Read More
Bulls in Control, But It’s Not Clear Sailing Ahead
By George Leong, B.Comm. for Profit Confidential
With February in the books, the stock rally over the first two months of the year and especially in January has been more substantial than I expected. I was thinking of 1,400 for the S&P 500 if everything worked out, but with 10 months left in the year, the index is a mere 28 points from 1,400 and at its highest levels since 2008. The blue-chips Dow Jones Industrial Average closed above 13,000 on Tuesday—the first time it has been done since 2008—and is within 1,160 points of its high of 14,164.53 on October 9, 2007.
Tech and small-cap stocks continue to lead the broader market similar to what we saw in 2010 when the NASDAQ and Russell 2000 surged 16.88% and 25.28%, respectively. The NASDAQ is already up 14.62% as of the close of Tuesday and will likely take a run at bettering its 2010 results. Small-caps have more room to advance to match the index’s performance of 2010.
With the upward stock rally in stocks, we are again beginning to see euphoric comments from the press talking about the stock rally moving towards the historical highs.
While the market sentiment continues to be bullish, with the new-high/new-low ratio displaying a bullish reading in each of the last 30 straight sessions dating back to January 17, I doubt the stock rally will continue to advance higher at the current rate.
After a blistering January, February has shown some stalling, with the stock rally facing more upper resistance on the charts. I expect this to continue.
A look at the technical picture shows an overextended rally that is technically overbought … Read More
Why the NASDAQ Blasting by the
Dow Jones Is Another Positive Signal
By Mitchell Clark, B.Comm. for Profit Confidential
The Dow Jones Industrial Average has really done a good job of recovering from the subprime mortgage meltdown low set in March 2009. During the financial crisis, the Dow Jones was at a level not seen since the spring of 1997 and it took 10 years for the index to break 13,000. Since the March low in 2009, it’s taken the Dow Jones only three years to accomplish the same thing. Looking back, it was one of the best trades going if you had the guts to buy into the fear. Buying around the stock market low in early 2009, you would have doubled your money, while owning blue-chip companies that pay dividends. Hindsight is always a luxury.
The Dow Jones Transportation Average is diverging, but it’s done so before on lots of occasions. Oil prices have been trending higher since the beginning of February and the Transports, as a group, were due for a correction. I don’t want to see this divergence last much longer, as this would be quite a bearish signal for the broader stock market. With the upwardly revised fourth-quarter gross domestic product (GDP) number showing decent strength, I find it hard to imagine that railroad and trucking stocks won’t keep doing well.
The big-cap companies that make up the Dow Jones Industrial Average have only recently been usurped by the performance of the NASDAQ. Since the beginning of February, large-cap technology has beaten the Dow Jones and corporate earnings within the sector have been surprising. (See Fourth-quarter Earnings: Taking the Market’s Pulse.) This is a positive signal for the rest of the stock market. … Read More
Dow Theory Flashes Classic Stock Market Warning
By Michael Lombardi, MBA for Profit Confidential
The Dow Theory, a reliable indicator of stock market and economic direction that has been around for almost 100 years, is flashing a warning signal.
The Dow Theory looks at the relationship between the Dow Jones Industrial Average and the Dow Jones Transportation Index.
The Dow Jones Industrial Average is an index made up of the stocks of 30 large American corporations. The average includes companies like Kraft Foods Inc. (NYSE/KFT), General Electric Company (NYSE/GE), Bank of America Corporation (NYSE/BAC), and IBM Corporation (NYSE/IBM).
The Dow Jones Transportation Index is an index of the largest transportation companies in the U.S. From railroads—Norfolk Southern Corporation (NYSE/NSC)—to airlines—Delta Air Lines, Inc. (NYSE/DAL)—to trucking—C.H. Robinson Worldwide, Inc. (NASDAQ/CHRW)—to marine transportation—Overseas Shipholding Group, Inc. (NYSE/OSG).
The Dow Theory states that the rise or fall in the Dow Jones Industrial Average must be confirmed by a rise or fall in the Dow Jones Transportation Index. This makes sense, because if the economy is growing, large corporations will do well and, in turn, ship more goods and services across the U.S. and around the globe, which means that the transportation companies will directly benefit and their stock prices will rise, too. The opposite also holds true.
The Dow Theory has been a very good tool over the last 100 years for calling market tops and bottoms.
Since 2009, the Dow Jones Industrial Average and the Dow Jones Transportation Index have been following each other closely. Something happened after February 3, 2012, however. The Dow Jones Industrials continued to climb higher, reaching a four-year high of 13,000 (which I predicted), while the Dow Jones Transportation Index … Read More
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