From the desk of Steve Strazza.
Our Top 10 report was just published; our weekly report highlighting the best 10 ideas and respective charts we are seeing across the markets this week.
1. No More Divergences For The Dow
There had been a classic “Dow Theory” divergence in place for several years, dating back to when the Dow Transportation Average peaked in 2018. This cleared itself up late last year when Transports actually beat Dow Industrials back to new all-time highs. They’ve continued to lead in the time since. What really matters though is that both continue to grind higher, confirming one anothers new highs along the way. We often talk about Modern or 21st Century “Dow Theory,” which uses the Semiconductor Index in place of Transports. This is because a strong argument can be made that semis are the new drivers of what is now a mainly services-based economy in the US (and abroad). While Transports continue to trade more or less at record highs, Semiconductors haven’t made a new high in over two weeks now. With money rotating out of Growth and Tech, this is something we’re keeping a close eye on. While a change in leadership is just fine, and actually something we’re anticipating, we still want to see these stocks participate on an absolute basis as they are imperative to the world economy.
