Let's Break the 30 Stocks of the Dow Industrials Into 3 Performance Camps
We'll use their 200-day moving averages as a benchmark.
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The Dow Jones Industrial Average is the most recognized market average by the average stock market watcher. Money managers pay attention to other benchmarks, but the DJIA has a price history going back to 1896. Every now and then I take the time to dig into all 30 stocks in the Dow Industrials to see how strong the components are. I do a visual inspection of each stock and I look at the slopes of the 200-day moving averages. I look to see how many stocks are trading above the rising 200-day line, how many have a negative 200-day line and how many are neutral.
This Thursday morning every financial website is telling their readers that the DJIA set a record high. Let's drill down.
I found 13 of the 30 stocks in the DJIA with rising 200-day moving average lines. They are Amgen AMGN , Apple AAPL , Boeing BA , International Business Machines IBM , Intel INTC , JPMorgan Chase JPM , McDonald's MCD , Microsoft MSFT , Procter & Gamble PG , Salesforce CRM , UnitedHealth Group UNH , Visa V and Walmart WMT .
I found 11 of the 30 stocks in the DJIA with declining 200-day moving average lines. They are 3M MMM , Chevron CVX , Cisco CSCO , Disney DIS , Dow DOW , Goldman Sachs GS , Johnson & Johnson JNJ , Merck MRK Travelers TRV , Verizon VZ and Walgreens Boots Alliance WBA .
There were six stocks with neutral 200-day lines at this point in time. They are American Express AXP , Caterpillar CAT , Coca-Cola KO , Home Depot HD , Honeywell HON and Nike NKE . Neutral lines could turn into positive lines, which would strengthen the DJIA.
I remember how the DJIA was positioned in October 2007. Only eight of the stocks were in uptrends at that time. The DJIA is in a stronger position today, but we need to keep up this exercise in the first quarter of 2024 to see if the number of bullish-looking stocks declines.
Bottom line strategy: I learned from Alan Shaw and Louis Yamada at Smith Barney Harris Upham to spend the time and do the work to reach sound conclusions about the markets. The DJIA is weighted by price, so higher-priced stocks have a bigger weighting. Let's keep that in mind in 2024.
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