Market Extra: The Dow is outperforming, which could be a sign that the latest stock-market rally will flame out

by | Nov 15, 2022 | Stock Market

While investors seek shelter in more defensively oriented equity names, one market technician sees the Dow’s growing margin of outperformance over the S&P 500 and Nasdaq as a sign that the latest rebound in stocks might fade away quickly like the last one did. In a Monday note to clients, Jonathan Krinsky, chief market technician at BTIG, said the Dow Jones Industrial Average
almost never outperforms during the early stages of an enduring equity rally — and when it does, these rallies typically fizzle.

See: The Dow is on track for record October as Big Tech tanks: What’s next for stocks as investors await Fed clues “I don’t think we’re in a durable rebound,” Krinsky said during a phone interview with MarketWatch. “People are trying to catch upside, but in more of a defensive manner.” First, Krinsky said that periods of Dow outperformance during the early stages of an equity rebound are incredibly rare over the past four decades of financial-market history. He pointed to four “new bull” markets — 1982, 2002, 2009 and 2020 — as examples. He pointed to 2002 as a particularly notable example. Like then, U.S. stocks have been caught up in a cycle where the Dow’s margin of outperformance has continued to widen.


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