As the Dow blazes through one millennium level after another, NYA is cautiously eyeing 12,000
There's been a lot of headline ink dedicated to the fact that Dow Jones Industrial Average (DJIA) millennium levels have been falling like so many dominoes in the wake of November's U.S. election results (with 22,000 the latest to tumble, as of last Wednesday morning). Considerably less media attention, however, has been paid to the millennium marker that's newly in play for the NYSE Composite Index (NYA), a broad measure of performance among New York Stock Exchange-listed common stocks.
On Tuesday, Aug. 1, NYA opened above 12,000 out of the gate -- presaging the Dow's record-breaking start on Wednesday morning -- and then, after an intraday trip down to 11,978.95, settled squarely at 12,000.02. The index's grip on this big round level turned out to be exactly as tenuous as that photo finish of a closing price suggests; the next day, NYA traded lower right from the opening bell, and clawed its way to a finish just 0.42 point above the prior session's low. Since then, NYA has stayed within range of the millennium level (peaking Friday as far north as 11,994.95), but has not yet mustered another formal challenge of 12,000 (even as the Dow went on to set additional record peaks each day through the end of the week).
And while it may seem strange to say so about an index that's fresh off record-high territory -- and still, by any reasonable measure, firmly ensconced in an uptrend -- we should acknowledge here that NYA has been a considerable laggard among its broad-based equity index peers since the time of the financial crisis. The index's daily relative strength versus the Dow recently cratered to zero, completing a long, steady march lower from its June 2008 high of 0.22. Versus the broader S&P 500 Index (SPX), NYA's daily relative strength bobbed above the 1.0 level frequently from February through July 2008 -- but this metric has been stuck in subzero territory since mid-2013, and is currently docked around negative 0.88.
In the interest of constructing something of an "apples to apples" comparison for the sake of fairness, we can turn to NYA's cross-Broadway counterpart, the Nasdaq Composite (COMP). But on this basis, NYA's daily relative strength versus the COMP hasn't ever exceeded 1.0 (at least, not since NYA's methodology was revamped in 2003), and has trended steadily lower to its current standing around negative 2.52.
And note the dotted lines on the accompanying NYA chart, highlighting the index's choppy, back-and-forth progress around key millennium levels over the past decade. In the post-crisis era, these psychologically significant price points haven't fallen easily -- and the action around 11,000, which was NYA's first "newly conquered" millennium level since the 2009 bottom, is particularly disheartening.
In fact, chart technicians will want to note that the time period between NYA's first daily close above 11,000 (June 19, 2014) to its eventual low around 8,938 a year and a half later (Jan. 20, 2016) was one of extremely choppy and turbulent price action for the S&P 500, culminating in a net loss of 5.1% for the benchmark U.S. equity index. So for those concerned that stocks may have run "too far, too fast" following the Dow's record-shattering run, it should be a worthwhile exercise to track NYA's progress around 12,000 for any potential "canary in the coal mine" signals.
Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, August 6.