The Stock Market Averages Which Are Not Making New Highs

In another indication of the lack of broad participation in recent stock market rallies, it’s notable that these averages are not keeping up: the Dow Jones Utility Average, the Dow Jones Transportation Average, the Russell 2000 ETF and the KBW Bank Index. None of those 4 have attained the “new high” status of the S&P 500 and the Nasdaq 100.

That’s because they don’t include the big cap tech and social media companies that have been off the chart lately — to the exclusion of, basically, the rest of the stock market. Money is heavily concentrated in the Alphabet/Amazon/Apple/Meta/Microsoft/NVIDIA group.

Stock Markets Not Keeping Up.

The Dow Jones Utility Average consists of 15 utility companies, the largest of which, by market capitalization, includes NextEra, Southern Company, Duke Energy and American Electric Power. Because of the debt load involved in this business, the stocks are interest-rate sensitive. Here’s the weekly price chart:

I’ve red-circled the spot where the 50-week moving average crossed to below the 200-week moving averages — it just happened, basically. The utilities peaked in March/April 2022 and it’s been a pattern of lower highs and lower lows since then. Note that the October 2023 low took out the previous support from September 2020.

The Dow Jones Transportation Average contains 20 stocks from the railroad, airlines, trucking, marine transportation and similar businesses. The largest components by market cap include Union Pacific, United Parcel Service, FedEx and Norfolk Southern. The weekly price chart is here:

That the price is trading above both up trending 50 and 200-week moving average is a positive. That it’s been unable to move above the July 2023 high is a negative and so is the average’s inability to reach into that late 2021 spike upward. This big, important sector is underperforming the tech and big cap social media group.

The benchmark iShares Russell 2000 ETF owns that group of smaller capitalization stocks traded on the NYSE and the Nasdaq but which don’t find representation in the S&P 500 or the Nasdaq 100. The small caps trade differently as you can see on this weekly price chart:

Although the small caps hit a higher 2023 high in December, the ETF is lacking the power to reach that level again in January, 2024. That’s a negative divergence from the major indexes. You can see that the group, now at $196, is definitely below the 2021 high of just above $235.

The KBW Bank Index consists of 24 bank stocks including big capitalization names such as BankAmerica, Citigroup, JP Morgan Chase and Wells Fargo. This is another interest rate sensitive group, highly focused on the actions of the Federal Reserve. The weekly price chart looks like this:

The Silicon Valley Bank collapse affected the entire banking sector in March, 2023 and you can see the big red selling bars where the 50/200-week moving average crossover took place. The index bottomed in May 2023 and has rallied since then but remains below the old highs.

When the Dow Jones Utility Average and the Dow Jones Transportation Average do not keep up with the Dow Jones Industrials, it’s a problem, according to Dow Theory. For expertise on that subject, you might want to read the work of Manual Blay, the editor of TheDowTheory.com.