As a short follow-up to my story on the SPDR S&P 500 ETF (SPY) of late Wednesday, I want to quickly show you how you can dig down into the components of the Dow Industrials to see how strong or how weak it might actually be.
The DJIA is a price-weighted index so higher-priced stocks can exert an undue influence on the index. Going through the 30 names in the DJIA this afternoon and doing a quick-and-dirty look at their individual daily bar charts I found that just 13 of the 30 companies were in clear uptrends. The other 17 stocks were in sideways trends or downtrends.
As a reference point, at the top of the market in October 2007 when the DJIA was setting a record at 14,000 or so there were only eight of the 30 stocks in uptrends. The other 22 stocks were in terrible technical shape. We all know how that ended.
The 13 stocks in an uptrend are American Express (AXP) , Apple (AAPL) , Chevron (CVX) , Cisco Systems (CSCO) , Exxon Mobil (XOM) , Intel (INTC) , Johnson & Johnson (JNJ) , Merck (MRK) , Microsoft (MSFT) , Nike (NKE) , Procter & Gamble (PG) , Travelers Companies (TRV) and Visa (V) .
I would keep a closer watch on these companies (above) and if they slip and turn lower then my opinion on the broad market will turn more bearish.