Today most of financial media is hype-driven headlines and attention-span-destroying horsesh*t.
That’s why, these days, everybody ignores the finer things, including this old-school indicator.
They treat it like it’s the Tito Jackson of stock market indexes.
Or the fifth Beatle. Nobody cares about it.
But I do. It’s more like George Harrison to me.
I think there’s a lot of value in the modern version of a 140-year-old theory.
And, like its related indexes, this one is saying “here comes the sun” and stocks are on the rise too…
WTF Is the DJC?
Polarity is in play with the Dow Jones Composite Average (DJC):
The red arrow points to prior-cycle highs. The green arrows point to where those prior-cycle highs provided support during drawdowns.
Why do I care about the Dow Jones Composite Average? And why should you care about it?
After all, it only exists because of the indexes that preceded it.
You know the old saying, “We stand on the shoulders of giants?” That’s the DJC.
Let me take you back in time…
According to the Library of Congress, the legendary Charles Dow first published the Railroad Index in the Customer’s Afternoon Letter in 1884.
The letter was a daily financial news bulletin and a precursor to The Wall Street Journal.
The Railroad Index included 11 stocks, highlighted by the New York Central and Union Pacific railroads.
It wasn’t even a “Dow Jones” index yet. That came later.
Meanwhile, the first calculation of what we know as the Dow Jones Industrial Average (DJIA) counted 12 different companies – including General Electric – in May 1896.
Charlie Dow selected the original components because they reflected the major areas of the U.S. economy following a major recession in the late 1800s.
He wanted to provide a quick and easy look at the U.S. economy.
The roster included names such as American Tobacco… American Sugar… Tennessee Coal & Iron… Chicago Gas Company… and U.S. Rubber Company…
Those are a few of the OG Dow components. The average started at 40.94 points. On Monday, it closed at 40,227.59.
The DJIA expanded to 20 stocks in 1916 and, finally, to 30 stocks in 1928.
In 1929 Dow Jones created the “Big 3,” introducing the Dow Jones Utility Average (DJU).
(That’s well before LeBron James took his talents to South Beach to join Chris Bosh and Dwayne Wade…)
The index managers formally removed any utilities stocks that were originally included in Dow’s Industrial Average.
There are 15 stocks included in the DJU to this day.
And, in 1970, the Railroad Index officially became the Dow Jones Transportation Average (DJT).
Now let’s get back to 2025…
Why 65 Is a Magic Number
The Dow Jones Composite Average combines them all – it’s made up of 65 stocks.
It includes all 30 stocks in the Dow Jones Industrial Average, 20 from the Dow Jones Transportation Average, and 15 from the Dow Jones Utility Average.
And it doesn’t get the attention that it deserves.
It wasn’t part of Charles Dow’s original tenets from the 1800s. So that pushes away the old school guys – like me, in some ways.
And the kids these days, the younger generation, simply lack the attention span to absorb Charlie Dow’s tenets. So they have no context for current price action.
That’s to say nothing of the fact that anything with the word “utility” in it is going to repel the folks who are only in it for the Nasdaq-100 and its tech-heavy composition.
But when you combine these 65 stocks into a price-weighted index, you get a heck of a look at the U.S. economy.
At the end of the day, that’s all Charlie was trying to do. He was a journalist, after all, not a trader.
So let’s give credit where credit is due.
The Dow Jones Composite Average is a collection of data and analysis tools that date back 140 years.
I’m proud to say I use it every day.
Today, it says we should be buying stocks.
Are you with me?
Stay sharp,
JC Parets, CMT
Founder, TrendLabs