On Friday, the Dow Jones Industrial Average closed above 50,000 for the first time in its history.
That number matters.
And yes, I know some people will argue with me, but I’ll keep pounding the table anyway. The Dow remains the world’s most important stock market gauge.
When someone asks how “the market” did, they’re almost always talking about the Dow.
Even the President of the United States weighed in this week, openly speculating about where the Dow might be by the end of his term.
Not the S&P 500. Not the Russell 3000. The Dow.
Whether you agree with that framing or not isn’t really the point. These major indexes move together over time.
You don’t need to pick sides for this discussion to matter.
What does matter is this: The Dow hitting 50,000 is a big deal.
But a single index, on its own, never tells the full story.
If the Dow were making new highs in isolation, we should be skeptical. New highs without confirmation are rarely something to celebrate.
But when the Dow is doing this alongside other key measures of the market, that changes everything.
And that’s where this gets interesting.
Because this isn’t just a Dow story.
What About the Average Joe?
One of the most common critiques of the Dow Jones Industrial Average is that it’s too narrow. Only 30 stocks. Too concentrated. Not representative.
I actually disagree. When you look at sector exposure, the Dow is much more diversified than the S&P 500 or the Nasdaq 100.
But fine. Let’s accept the argument for a moment.
If the Dow is just a collection of headliners, then the next logical step is to look beyond size and ask a better question.
What’s the average stock doing?
That brings us to the equal-weight S&P 500.
Instead of letting the largest companies dominate the index, this version gives every stock the same weight. Big or small, it all counts the same.
And on Friday, that equal-weight index closed at new all time highs:
That tells us the gains aren’t being driven by a handful of mega caps. The average stock in the S&P 500 is participating.
Now let’s take it one step further down the capitalization scale.
The S&P MidCap 400, which represents companies between small caps and large caps, also closed at new all time highs:
These aren’t the market darlings. Not the biggest names. Not the smallest, either.
This is the middle of the market, the Jan Bradys of the stock market.
So now we have the headliners making new highs, the average stock making new highs, and the middle of the market making new highs.
At this point, it’s worth asking one more question.
What’s the median stock doing?
For that, I look to the Value Line Geometric Index. This index tells us what the median stock is doing.
And on Friday, it closed at new multi year highs:
That confirms what we’re already seeing from the equal-weight S&P 500 and the MidCap 400.
Strength is not isolated. It’s broad. It’s persistent. And it’s coming from multiple angles.
This is why context matters.
The Dow closed at the highest level in its entire history, a history that goes back to the late 1800s. If it were doing that alone, we would be having a very different conversation.
But it’s not alone.
The averages are making new highs. The middle is making new highs. And the median stock is making new highs.
So why does this matter?
Because at TrendLabs, the first thing we do is identify the market environment. We want to know which behaviors are being rewarded and which ones are being punished.
Right now, buying stocks is being rewarded.
Betting on an imminent collapse is not.
In bull markets, historically, it pays far better to own stocks than to be short them.
This is not complicated.
The market is doing exactly what bull markets do.
And we are acting accordingly.
This Week in Everybody’s Wrong
On Monday, we separated signal from noise.
The most bullish thing price can do is go up.
And one of the most important prices in the stock market is going up.
On Tuesday, we alerted everybody to the fact that stocks exist outside the United States of America.
We love America as much as anybody, but the U.S. is lagging right now.
They’re a global asset class, so let’s step back, zoom out, and look at stocks everywhere.
On Wednesday, we observed a quiet stampede into what nobody owns.
Sure, the U.S. has been lagging. Still, plenty of U.S. stocks have been keeping up with the rest of the world.
They just aren’t mega-cap tech stocks and the Magnificent 7.
On Thursday, it was the one-year anniversary of MicroStrategy rebranding to Strategy.
MSTR stock is down big since then. But this isn’t about MSTR stock.
This is about narratives and a pattern.
On Friday, we talked about how people are pessimistic about stocks again.
The sudden return of bearishness feels misplaced.
What we’ve seen is a narrow unwind, not a market falling apart.
On Saturday, Jason Perz treated us to another great read that draws on his broad and deep experience.
Dude’s a BMXer and a serious baller.
He’s also a killer portfolio manager who just booked his best year ever.
Have a great Sunday.
We’ll see you Monday morning…
Stay sharp,
JC Parets, CMT
Founder, TrendLabs