New Highs for Dow Jones, Despite Negative Internals

The Dow Jones Industrial Average (.DJI) rallied slightly less than +0.5%, closing at a fresh All Time High at 26,774. This is the second new high for the Blue Chip average since late January, surpassing its prior high from September by merely 40 points.

The DJIA has gained +1.2%, the first 2 days of the fourth quarter (Q4) following a +9% gain in Q3, as Industrials, Heavy Equipment, Aerospace, and Big Pharma applaud the successfully renegotiated trade agreement with Canada and Mexico, hence the moniker, the United States Mexico Canada Agreement (USMCA).

While investors appetite for US Dollar sensitive Multinationals has been strong the last 2 days, this has not been part of a broad based rally. The DJIA was the only Major Market average with gains Tuesday, with the rest finishing with losses ranging from fractional to ~-1%.

The S&P 500 (.INX) lost less than a couple points, amidst mixed performance from the Banks, moderate gains the energy sector, and some obvious digestion in the high flying tech space with a few exceptions. Keep a close watch on the energy names the next 2 weeks, as they’ve had a big run as crude oil has moved to its highest level in 4 years, and a bearish headline or 2 for oil prices could spark a quick reaction to the downside.

NASDAQ Composite (.IXIC) declined ~0.5% and most notably, closed fractionally below the benchmark 8000 level. Social Media stocks remain jittery as they struggle to escape recurring account privacy concerns. Amazon.com Inc. (AMZN), at -1.5%, was a leading weight on NASDAQ, as their plan to raise minimum pay to $15/hour received favorable reviews from nearly everyone but shareholders as it will definitely impact their margins.

A major outlier in the tech space was Intel Corporation (INTC), +4%, which also contributed to the outperformance of the DJIA,  and boosted other names in the chip space.

The DJ Transportation Average lost just over -1%, and was decidedly in negative territory all day.  The 11,250 – 11,300 level could be a critical near term support level.   The DJTA rallied off this level numerous times in August and early September before posting new highs on September 14.

Also, the Tuesday close of  11,281 is right at the 50 day moving average, although comfortably above the 200 day MA of 10,800.

Adding to the concern of Tuesday’s rally being narrowly focused on  Mega Cap Blue Chips,  the Advance/Decline stats were decidedly negative. On the NYSE, decliners led advancing issues 3 to 2. In the NASD market, it was a bit more negative with declining issues outpacing gainers by slightly more than 2 to 1.

We’re not going to push the panic button yet, being only 2 days into a new Quarter there’s typically plenty of portfolio shuffling, particularly as we head into the last Quarter of the year.    That being said, there are plenty of things than demand close attention….Oil prices…..10 year yield above 3%……September jobs report this Friday….follow through on trade talks……Midterm elections in 5 weeks…..And of course the Big Kahuna…..Q3 earnings starting a week from Friday.

Investors had a great Q3! I wouldn’t be surprised to see the Big Guys take some profits in advance of the Q3 earnings season.