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The Inflection Point (TIP™) is a weekly long/short market newsletter focused on market trends and companies at important inflection points in both their business models and technical stock formations. TIP™ is produced each week by John Henderson, an independent trader, and his team of market... More
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  • Why The Dow Is Lagging the S&P 500 and the Nasdaq 0 comments
    Jul 6, 2009 01:32 PM | about stocks: AA, AXP, BA, BAC, CAT, CSCO, DD, DIS, GE, HD, HPQ, IBM, INTC, JNJ, JPM, KFT, KO, MCD, MMM, MRK, MSFT, PFE, PG, T, TRV, UTX, VZ, WMT, XOM

    The Dow Jones has been lagging the S & P 500 and the Nasdaq since the market indices bottomed in March. From the lows of March 2009 to the close of trading on June 30, 2009, the Dow has bounced 31%, the S&P 500 38% and the Nasdaq 45%. The Dow has lagged the S&P 500 by 7%, and the Nasdaq by a whopping 14%. Year-to-date percentages (through June 30th) show the Dow to be lagging even further. From December 31, 2008 through June 30th 2009, the Dow is down 4%, the S&P 500 up 2% and the Nasdaq up 16%. The Dow is lagging the S&P by 6% and the Nasdaq by 20%. 

     
    A similar story takes place with the moving averages particularly with the 200 DMA. The S&P 500 and the Nasdaq are well above their 200 dma. The Nasdaq has been well above its 200 dma since May and the S&P 500 has been above its 200 dma since June 1st. The Dow has made a few half-hearted attempts to clear its 200 dma, but to no avail as the attempts fail each time. So why is the Dow lagging the S&P 500 and in particular the Nasdaq so much?
     
     
    I was curious too so I took a closer look at the Dow. Year-to-date (again through June 30th), 14 of the Dow stocks are up and 16 are down. As far as the moving averages go, 16 of the Dow stocks are trading above their respective 200 dma, and 14 below. The 4 greatest performers in the Dow are American Express gaining 29%, IBM gaining 25%, Intel gaining 15% and Microsoft gaining 24%. The four worst Dow performers are Caterpillar down 24%, General Electric down 25%, Proctor and Gamble down 16% and WalMart down 13%.
     
     
    Looking at the Dow outperformers, three are from the technology space. So that seems to be the key this year to outperformance – technology. Interesting enough you may think with the tremendous upheaval in the financial system that the financial stocks would have stood out to the down side. Well, that does not seem to be the case at least with the Dow. American Express as mentioned above was actually the number one Dow performer through June 30th. The 4 largest underperformers include Caterpillar losing 24%, General Electric losing 25%, Proctor and Gamble losing 16% and Wal Mart losing 13%. There does not seem a pattern to the underperformers though. It seems that the Dow underperformance is due to its lack of technology stocks. This would explain why the tech heavy Nasdaq is outperforming by such a large margin.  
     
    Below is a table of the Dow 30 as of the close of June 30th.
    Article written by Tom Henderson
    Dsiclsoure: The firm I work for is long Microsoft. There are no other disclosures.
     
    Symbol% ytdAbove 50   dma? Above 200 dma?    Industry
      
    aa-8.26abovebelowMaterials
    axp29.04belowaboveFinancial
    ba1.60belowbelowIndustrial Aerospace
    bac-5.92abovebelowFinancial
    cat-24.27belowbelowIndustrial Farm
    csco14.42belowaboveTechnology / Network
    cvx-8.73belowbelowMaterials Oil
    dd4.57belowbelowMaterials Chemicals
    dis2.82belowaboveEntertainment
    ge-24.92belowbelowConglomerate / Ind / Fin
    hd4.88belowaboveHome Improvement
    hpq7.06aboveaboveTechnology 
    ibm25.40aboveaboveTechnology 
    intc15.01aboveaboveTechnology - Semi
    jnj-3.43abovebelowPharmaceuticals
    jpm9.69belowaboveFinancial
    kft-3.28abovebelowFood Diversified
    ko8.04aboveaboveBeverages 
    mcd-5.92aboveaboveRestaurants
    mmm6.50aboveaboveConglomerate / Industrial
    mrk-5.19aboveabovePharmaceuticals
    msft23.87aboveaboveTecnology - software
    pfe-12.49abovebelowPharmaceuticals
    pg-16.04abovebelowPers. Consumer Products
    t-10.16abovebelowTelecom
    trv-7.75aboveaboveFinancial / Insurance
    utx1.54aboveaboveConglomerate / Industrial
    vz-6.74aboveaboveTelecom
    wmt-12.64belowbelowDiscount retail
    xom-11.46abovebelowEnergy Oil Gas

                 

    		14 up           
     16 down
    Stocks: AA, AXP, BA, BAC, CAT, CSCO, DD, DIS, GE, HD, HPQ, IBM, INTC, JNJ, JPM, KFT, KO, MCD, MMM, MRK, MSFT, PFE, PG, T, TRV, UTX, VZ, WMT, XOM
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