The stock market keeps showing up to the party making new highs.
The S&P 500 is there. The Nasdaq 100 showed up early and already took over the music. The Nasdaq Composite is dancing on tables.
Small caps made it. Mid caps made it. Even a bunch of the equal-weight indexes are hanging around near the cooler talking about how broad this whole thing has become.
But where’s the Dow?
Seriously. Has anybody seen it?
The Dow Jones Industrial Average hasn’t closed at a new all-time high since February 10. We’re already two-thirds of the way through May.
Three-plus months. No new highs:
That’s weird. Not bearish necessarily, just weird.
And I know what some of you are thinking, “Who cares about the Dow?”
Trust me. I used to be that guy.
I Used To Think I Was Too Cool for the Dow
When I first got into this business, I thought the Dow was for old guys in suspenders yelling on the floor of the exchange.
I was an S&P 500 guy.
Institutional. Professional. Modern.
I thought I was so cool walking around Midtown Manhattan in a cheap suit thinking I knew things.
What a little punk I was.
Because the older I get, the more I realize nobody knows anything. And the market has a funny way of humbling people who think they’re smarter than the tape.
One thing I learned over the years is this: You don’t fight Papa Dow.
You can ignore it if you want. A lot of people do. But when the Dow starts acting differently than the rest of the market, I pay attention.
Not because the Dow is magic. Because the Dow is old money.
The Dow is industrials. Financials. Multinationals. The big boys. The companies your grandfather owned and your golf buddy still owns.
It’s the index people stopped respecting right before it quietly became important again.
And Papa Dow has left the party.
Maybe Papa Dow Just Went To Get More Beer
Now, before everybody starts screaming “divergence” and “market top” and all the other dramatic things financial television loves to do every seven minutes, let’s relax for a second.
Maybe the Dow just stepped out for a little while.
Maybe the party ran out of beer.
Maybe Papa Dow looked around and said, “What is this garbage you people are drinking?” and went to upgrade the operation.
Maybe it went out for wine.
Maybe champagne.
Maybe a sleeve of Fireball nips and a pack of cigarettes.
I don’t know.
Meanwhile, the rest of the market kept the music going.
Tech stocks never went to bed. Semiconductors are still doing semiconductors things.
Speculation came back. Crypto’s awake again.
And here’s the part worth paying attention to: underneath the surface, things actually look pretty good.
Small caps are participating. Breadth expanded, meaning more and more stocks have been enjoying the celebration.
Equal-weight indexes hanging in there, so it’s not just a few of the big names that are driving things.
That’s not what a market top looks like from the inside. Market tops are narrow and suffocating.
This isn’t narrow.
So on one hand, the internals are telling me: healthy bull market, keep going.
On the other hand, Papa Dow hasn’t confirmed any of it.
The Thing About Missing Guests
Not every index needs to make new highs at the exact same second.
That’s not how trends work. Leadership rotates. Sometimes the Nasdaq carries the torch. Sometimes small caps catch up later.
Sometimes the boring old industrial names spend six months doing absolutely nothing before suddenly becoming the life of the party again.
Markets breathe.
Honestly, maybe that’s all this is.
Maybe the Dow disappeared for a little while and comes walking back through the front door fully recharged. Caterpillar (CAT) wakes up. Goldman Sachs (GS) stops acting drunk.
The old economy stocks catch a bid and suddenly everybody starts talking about “broadening participation” like they discovered fire.
That can absolutely happen.
But just know that if the Dow is missing in action, historically that’s been worth paying attention to.
I’m not making some dramatic crash call here. The internals still look healthy. Breadth has been strong enough. Participation has expanded. Plenty of evidence still supports this bull market.
But I’ve also been doing this long enough to know the Dow tends to sniff out problems earlier than people want to admit.
Some of the biggest market tops I’ve lived through started with this exact kind of non-confirmation before the major indexes eventually caught down to reality.
So now we wait.
Either the Dow Industrials wake up and confirm the rest of the market, which would probably unleash another powerful leg higher led by all the stocks nobody has cared about lately.
Or the rest of the market eventually rolls over to meet them.
I don’t know which one it’ll be yet.
But while everybody’s busy dancing on the tables celebrating new highs, I’d still like to know where the Dow went.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs