At the close on September 23, the Dow Jones Industrial Average was up 7.2% for the year, well behind the S&P 500's 12.6% gain, the Nasdaq Composite's 15.9% rise and the Russell 2000's 12.6% advance. The Dow has also lagged in September, falling more than 3% while the other major indexes have ranged from roughly flat to a 2.1% gain. The index's weakness, however, has not been shared by all of its constituents: about one-third are still developing bullish technical patterns.
IBM, Boeing and Nike Weigh on the Dow
The Dow's pressure this year has been concentrated in several major components. Shares of IBM and Boeing are down between 8% and 23% year to date, while Nike has fallen 43%, making it the weakest-performing constituent among the Dow's industrial companies. That divergence has weighed on the index and means the Dow's headline performance does not necessarily reflect the direction of every major blue-chip stock.
At the same time, several companies in the consumer, technology, healthcare and industrial sectors continue to show relatively firm technical structures. Justin Nielsen, head of stock market research at IBD, said nine of the Dow's 30 components are listed on Nasdaq, and those companies account for 71% of the index's total market capitalization. Nasdaq-listed technology and consumer companies therefore have a significant influence on the Dow's performance.
Apple Remains About 2% Below Its Buy Point
Apple is one example of the divergence among Dow components. The stock attempted to break out Tuesday from an asymmetrical cup-without-a-handle base, but the move was not confirmed and shares subsequently fell back inside the pattern. As of the relevant trading session, Apple was about 2% below its $344.57 buy point.
The move leaves Apple near an important technical level, although selling pressure met its initial breakout attempt. For market participants tracking large technology stocks, whether Apple can reclaim and hold that level will depend on subsequent price action and trading volume. One breakout attempt alone is not enough to confirm a change in trend.
Index Weakness Masks Wide Stock-by-Stock Gaps
The Dow's underperformance relative to the S&P 500, Nasdaq Composite and Russell 2000 reflects the widening gap between its constituents. Nike, IBM and Boeing have pulled the index lower, while Apple continues to trade near a key technical level and some consumer, technology, healthcare and industrial stocks retain comparatively constructive chart patterns.
Guests discussing market volatility this week include portfolio manager George Tkaczuk, the winner of the 2020 U.S. Investing Championship. He will address the frequent false breakouts appearing across the major indexes and the next key levels that could alter the market's pace. For investors, the more relevant signals currently lie in individual stock structures and the Dow's internal performance, rather than in the index's single headline percentage.