What PowerRatings Are Telling You About The Dow
Today’s
PowerRatings
strategy focuses on the Dow Jones Industrial Average. TradingMarkets publishes a
daily list of all 30 components of the Dow and their PowerRatings:
Dow 30 PowerRatings
With the major averages hitting new multi-year, and in some cases all-time highs
today, let’s see what the PowerRatings are telling us about the Dow. The current
list shows all 30 stocks have PowerRatings between 4 and 6 (with only two 6’s).
This suggests the Dow is neither overbought, nor oversold — it’s neutral.
Considering the sharp advance since 03/08/06 (see chart) this is a little
surprising. One would normally expect to see at least a few stocks in overbought
territory (low PowerRatings). This data suggests that the recent advance in the
Dow has come on the back of accumulation across the board.
However, when looking at the Dow, it’s important to remember that it differs
from most other indices because it is price-weighted. That means the highest
priced stocks have the most influence in the index. Using yesterday’s closing
prices the ten most heavily weighted stocks in the index are:
| Symbol | PowerRating | Symbol | PowerRating |
( IBM | Quote | Chart | News | PowerRating) |
5 | ( AIG | Quote | Chart | News | PowerRating) |
5 |
( BA | Quote | Chart | News | PowerRating) |
4 | ( XOM | Quote | Chart | News | PowerRating) |
5 |
( CAT | Quote | Chart | News | PowerRating) |
4 | ( PG | Quote | Chart | News | PowerRating) |
6 |
( MMM | Quote | Chart | News | PowerRating) |
4 | ( JNJ | Quote | Chart | News | PowerRating) |
4 |
( MO | Quote | Chart | News | PowerRating) |
5 | ( UTX | Quote | Chart | News | PowerRating) |
5 |
The next thing to look for are signs of strength
or weakness in these ten stocks. As the table above shows, there is nothing to
suggest the Dow’s heavyweights are exerting pressure in either direction. When
looking at these ten stocks PowerRatings for the past 5 days, only CAT has moved
from either a high or low PowerRating to neutral (CAT fell from an 8 to a 6).
Without any good candidates to buy or sell it doesn’t look like now is a good
time to be initiating positions in the Dow, or its 30 stocks. But keep
monitoring these lists for any changes.
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Ashton Dorkins
Editor-in-Chief