Apparently it’s Equal-Weight Week here at TrendLabs.
I didn’t script this… but the market sure did.
On Monday, we talked about Semiconductors wrestling with their equal-weight breakout.
Tuesday, it was Consumers flexing new highs on the equal-weight charts.
Yesterday, we saw the equal-weight S&P 500 stepping up to lead the cap-weighted version.
And today? All eyes on the Dow.
Call it coincidence, call it rhythm, call it whatever you want.
But one thing you’ll always hear me say is, “Don’t fight Papa Dow!”
New All-Time High
Yesterday, the Dow Jones Industrial Average closed at another new all-time high on an equal-weight basis.
No one talks about this.
But here it is:
This was the highest-ever close for this index, which takes all 30 stocks and gives them each the same weighting, regardless of market capitalization or price.
A lot of people seem to have a problem with the price-weighted nature of the traditional Dow Jones Industrial Average.
In this index, the higher the price of the stock, the higher the weighting in the Index.
So stocks like Goldman Sachs (GS), with a $720 price, and Microsoft (MSFT), at $505, and Caterpillar (CAT), at $420, have the largest weightings in the Dow.
Companies like Verizon (VZ) with a $45 price, and Nike (NKE), at $76, have some of the smallest weightings in the index.
But the chart above shows what the index looks like on an equally weighed basis, where each of the 30 stocks count the same in the calculation.
Yesterday, that index – the 30 most important stocks in America – closed at its highest levels ever.
That is not indicative of a downtrend, or any kind of distribution whatsoever.
The Price-Weighted Dow
Here’s a look at the original Dow Jones Industrial Average, the one we categorize around here as the World’s Most Important Stock Market Index.
Does this look like a massive top to you?
As someone who does this all day every day and has been doing it for decades, I can assure you this is not typically what tops look like.
Could it be a massive top? Could the entire “house of cards” come tumbling down?
Sure.
But is that the bet we want to make right here?
No. The bet is that this one resolves higher, just like the equal-weight version already did.
Don’t fight Papa Dow.
I’ll say it as many times as I need to.
New High Watch
The Dow hasn’t closed at a daily record high since December 4, 2024, (45,014). With the index back at 45,000, we’re officially on all-time high watch.
This could happen today, or tomorrow, or next week.
Maybe it takes longer than that.
But we’re only a few points away from seeing the Dow Jones Industrial Average close the day at a new all-time high for the first time this year.
We’ve already seen the highest weekly close ever. We got that last Friday.
But we’re looking for a new high on a daily closing basis.
People don’t like it. They’re scared of new highs.
They’re all wrong.
New highs are characteristic of healthy uptrends. Go back in history and see for yourself.
Stay sharp,
JC Parets, CMT
Founder, TrendLabs