Why the Dow Has Underperformed in 2014

by Sam Collins | February 13, 2014 2:26 am

Stocks closed on a mixed note Wednesday following a four-day winning streak for the Dow industrials and S&P 500.

Federal Reserve Chair Janet Yellen had her appearance before the Senate Banking Committee postponed due to weather. She will resume her testimony today if the weather cooperates.

The weekly Mortgage Bankers Association’s (MBA) report noted mortgage applications fell 2% versus a 0.4% increase last week. And the Treasury Department’s monthly budget report showed a smaller-than-expected deficit for January of $10.4 billion versus an expected $27.5 billion.

Today, watch for weekly initial claims and January retail sales at 8:30 a.m. EST.

At Wednesday’s close, the Dow Jones Industrial Average fell 31 points to 15,964, the S&P 500 lost less than a point at 1,819, and the Nasdaq rose 10 points to 4,201. The NYSE’s primary market traded 640 million shares with total volume of 3.3 billion shares. The Nasdaq traded total volume of 2 billion shares. Advancers outpaced decliners on both the Big Board and Nasdaq by 1.3-to-1.

DJI Chart
Click to Enlarge

Chart Key[1]

Although the Dow has rallied from below its 200-day moving average, it is the weakest of the major indices. It has so far failed to make a successful charge above its 50-day moving average at 16,091 or the resistance line at 16,120.

NYSE Chart
Click to Enlarge

The NYSE Composite has rallied from its bull channel support line and 200-day moving average — both just under 9,800. In contrast to the industrials, it has held above its 50-day moving average and also flashed a buy signal from its MACD indicator.

Conclusion: The failure of the Dow Jones Industrial Average to perform as well as the other indices probably has more to do with the international orientation of many of the Dow 30 companies. The emerging markets theme, which was touted by many analysts late last year, turned into a flop, so the Dow’s performance has been sluggish compared to the broad-based indices.

The NYSE Composite and the S&P 500 represent a broad base of quality stocks, and the charts of both (see S&P 500 chart[2]) show positive technical attributes that are missing in the Dow. 

However, volume has been light, accompanied by lackluster market breadth. This indicates that the highs of December will probably not be exceeded until a significant base is formed. Expect the S&P 500 to be bounded by the support line at 1,775 and resistance just above 1,813 for the near future while the longer-term trend remains bullish.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here[3].

For a list of this week’s economic reports due out, click here[4].

  1. [Image]: https://investorplace.com/wp-content/uploads/2013/05/chart-key.gif
  2. see S&P 500 chart: https://investorplace.com/2014/02/daily-stock-market-news-watch-new-buy-signal-sector-today/
  3. click here: http://www.bloomberg.com/apps/ecal?c=US
  4. click here: http://www.bloomberg.com/markets/economic-calendar/

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