Weight of the evidence
A not so brief note on my process of looking at the Dow 30 stocks
Hi friends, I hope you can stick with me this post is going to be a long one with lots of charts!!
So, who has time these days? Especially to scan over 500 stocks in the S&P500 on both weekly and daily timeframes... that’s 1000 charts!! But I want to get an idea of how the entire market looks collectively… My answer is that I find by reviewing each stock in the Dow 30 to be just as advantageous and one of the best ways to get a measure of the strength or weakness in the US stock market.
By going through each of these 30 stocks, I can get a better feel for the market itself rather than obtaining a conclusion from just analysing an index.
If you take a look at the chart of the Dow Jones Industrial Average and overlay it with the S&P500, they look pretty much the identical.
As the correlation is this high, then going through each component of the Dow 30 on both weekly and daily timeframes is a more valuable use of time. It is now only 60 charts!
Today I will go through my process, which is a ‘weight of the evidence’ method and ask myself, Are there more good stocks or bad stocks? This will help me layout my conclusion at the end.
3M
Near term support is in the region of 150;
Near term resistance is in the region of 164;
Price smoothing: Downwards sloping;
Momentum: RSI in Neutral range;
Relative Strength: Clearly underperforming the S&P 500 and its sector on all timeframes;
Bearish evidence: In a clear downtrend with lower high and lower lows.
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside. Though 150 level recently holding could see a switch in trend.
American Express
Near term support is in the region of 97.50;
Near term resistance is in the region of 114.50;
Momentum: RSI in Neutral range;
Relative Strength: Underperforming relative to the S&P 500, Slight outperformance longer-term relative to its sector;
Bearish evidence: 11.28% under 200-day simple moving average.
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside and retest of the 2020 lows if the 38.2% Fib level breaks. LT Trend is still up.
Apple
Near term support is in the region of 328;
Near term resistance is at the all-time high from this week;
Price smoothing: Strong upwards trend;
Momentum: RSI is in bullish range;
Relative Strength: Clearly outperforming the S&P 500 and its sector on all timeframes;
Bullish evidence: Apple is at ATH's, 30.16% above 200-day simple moving average and LT trend continues to go higher and higher.
Overall, this chart has a bullish appearance with a confluence of technical evidence pointing to further upside.
Boeing
Near term support is in the region of 150;
Near term resistance is in the region of 164;
Price smoothing: Downwards sloping;
Momentum: RSI in Neutral range;
Relative Strength: Shorter-term outperforming the S&P 500 and its sector. however, still underperformance on the longer timeframe;
Bearish evidence: In a clear downtrend with lower high and lower lows.
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside. Though it looks to have found a base around 100, with a strong breakout of the 178 region, if it can hold and move forward from this level, we could see a switch in trend.
Caterpillar
Near term support is in the region of 112;
Near term resistance is in the region of 139;
Price smoothing: Flat;
Momentum: RSI in Neutral range;
Relative Strength: Underperforming relative to the S&P 500, Slight outperformance longer-term relative to its sector;
Bearish evidence: Price is whipsawing around the 200-day moving average
Overall, CAT has been stuck in a range for the past two years and is currently in the middle of that range. This market will continue to move sides until price tells me otherwise.
Chevron
Near term support is in the region of 88;
Near term resistance is in the region of 108;
Price smoothing: Downwards sloping;
Momentum: RSI in Neutral range moving into bearish ranges;
Relative Strength: A mixed bag of relative strength;
Bearish evidence: In a clear downtrend with lower high and lower lows.
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside.
Cisco Systems
Near term support is in the region of 40.40;
Near term resistance is in the region of 49.50;
Price smoothing: Downwards sloping;
Momentum: RSI in Neutral range;
Relative Strength: Clearly underperforming the S&P 500 and its sector on all timeframes. Longer timeframe looks to be forming a base relative to its index and sector;
Bullish evidence: LT trend is up;
Overall, this chart has a neutral appearance with a confluence of technical evidence pointing to further sideways price action. LT trend is still up.
Coca-Cola
Near term support is in the region of 44.40;
Near term resistance is in the region of 50;
Momentum: RSI in Neutral range moving into bearish ranges;
Relative Strength: Clearly underperforming the S&P 500 and its sector on all timeframes;
Bullish evidence: LT trend is up;
Overall, this chart has a neutral appearance with a confluence of technical evidence pointing to further sideways price action. A break of the 44.40 level will see further downside.
Dow
Near term support is in the region of 37.50;
Near term resistance is in the region of 46;
Momentum: RSI in Neutral range;
Relative Strength: Relative strength looks to be rolling over on all timeframes;
Bearish evidence: In a clear downtrend with lower high and lower lows.
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside.
Exxon Mobil
Near term support is in the region of 40;
Near term resistance is in the region of 66;
Price smoothing: Downwards sloping;
Momentum: RSI in Neutral range moving into bearish ranges;
Relative Strength: Underperforming the S&P 500 and its sector;
Bearish evidence: In a clear downtrend with lower high and lower lows.
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside.
Goldman Sachs
Near term support is in the region of 194.50;
Near term resistance is in the region of 222;
Momentum: RSI in Neutral range moving into bullish ranges;
Relative Strength: Gaining relative strength to its sector. However, still underperforming relative to the S&P 500;
Bullish evidence: Yesterdays strong close back above 61.8% fib level
Overall, GS has been stuck in a range for the past six years and is currently in the middle of that range. This market will continue to move sides until price tells me otherwise.
Home Depot
Near term support is in the region of 237;
Near term resistance is at the all-time high from early June;
Momentum: RSI in Neutral range;
Relative Strength: Short term weakness. However, longer-term outperformance the S&P 500 and its sector;
Bullish evidence: HD's at ATH's, 9% above the 200-day simple moving average and LT trend continue to go higher.
Overall, this chart has a bullish appearance with a confluence of technical evidence pointing to further upside.
Intel
Near term support is in the region of 56.50 & 50% Fib level;
Near term resistance is in the region of 63.50 & 78.6% Fib level;
Momentum: RSI in Neutral range moving into bearish ranges;
Relative Strength: Outperformance relative to the S&P 500 long term. However, weakness in all other timeframes;
Bullish evidence: LT trend is up;
Overall, this chart has a neutral appearance with a confluence of technical evidence pointing to further sideways price action. A break of the 50% Fib level will see further downside.
IBM
Near term support is in the region of 117 & 38.2% Fib level;
Near term resistance is in the region of 132 & 61.8% Fib level;
Price smoothing: Downwards sloping;
Momentum: RSI in Neutral range moving into bearish ranges;
Relative Strength: Strong underperformance relative to the S&P 500 and its sector;
Bearish evidence: LT trend rolled over in 2012/2013 and is now in a downtrend;
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside price action. A break of the 38.2% Fib level will see further downside.
Johnson & Johnson
Near term support is in the region of 137 & 61.8% Fib level;
Near term resistance is in the region of 148;
Momentum: RSI in bearish range moving into oversold range;
Relative Strength: Underperformance relative to the S&P 500 and its sector;
Bullish evidence: LT trend is up;
Overall, this chart has a neutral appearance with a confluence of technical evidence pointing to further sideways price action unless it is above 149.
JPMorgan
Near term support is in the region of 83;
Near term resistance is in the region of 117 & 61.8% Fib level;
Price smoothing: Flat, starting to slope downwards;
Momentum: RSI in Neutral range;
Relative Strength: Underperformance relative to the S&P 500 and its sector. However, slight outperformance relative to its sector on the longer timeframe;
Bearish evidence: Still below 38.2% Fib level
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside. Holding above its 38.2% Fib level might slow the downwards price action.
McDonald's
Near term support is in the region of 173 & 50% Fib level;
Near term resistance is in the region of 188 & 61.8% Fib level;
Price smoothing: Starting to slope downwards;
Momentum: RSI in bearish range;
Relative Strength: Underperformance relative to the S&P 500 and its sector;
Bearish evidence: Below 61.8% Fib level and 200-day moving average
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside. Holding above its 61.8% Fib level might slow the downwards pressure to continue the LT uptrend.
Merck
Near term support is in the region of 72.5 & 38.2% Fib level;
Near term resistance is in the region of 87 & 61.8% Fib level;
Price smoothing: Starting to slope downwards;
Momentum: RSI in bearish range;
Relative Strength: Underperformance relative to the S&P 500 and its sector;
Bearish evidence: Below 50% Fib level and 200-day moving average
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside. Holding above its 61.8% Fib level might slow the downwards pressure to continue the LT uptrend.
Microsoft
Near term support is in the region of 190;
Near term resistance is at the all-time high from this week;
Price smoothing: Strong upwards trend;
Momentum: RSI is in bullish range;
Relative Strength: Clearly outperforming the S&P 500 and its sector on all timeframes;
Bullish evidence: MSFT is at ATH's, 24% above 200-day simple moving average and LT trend continues to go higher.
Overall, this chart has a bullish appearance with a confluence of technical evidence pointing to further upside.
Nike
Near term support is in the region of 96 & 78.6% Fib level;
Near term resistance is at the all-time high from early 2020;
Momentum: RSI is in bullish range;
Relative Strength: Outperforming the S&P 500 and its sector on all timeframes;
Bullish evidence: Nike recently tested its ATH but drifted, 9% above 200-day simple moving average and LT trend continues to go higher.
Overall, this chart has a bullish appearance with a confluence of technical evidence pointing to further upside.
Pfizer
Near term support is in the region of 83;
Near term resistance is in the region of 34.50 & 50% Fib level;
Price smoothing: Downwards sloping;
Momentum: RSI in bearish range and oversold conditions;
Relative Strength: Underperformance relative to the S&P 500 and its sector;
Bearish evidence: current price is below 38.2% Fib level and in a downtrend
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside. Holding above its 50% Fib level might slow the downwards price action.
Procter & Gamble
Near term support is in the region of 115.50 and 61.8% Fib level;
Near term resistance is in the region its all-time high;
Price smoothing: Strong upwards movement into a flat 200-day moving average;
Momentum: RSI in Neutral range;
Relative Strength: Longer timeframe relative strength with shorter-term weakness;
Bullish evidence: LT trend is up;
Overall, this chart has a neutral appearance with a confluence of technical evidence pointing to further sideways price action. Holding above its 78.6% Fib level might resume the uptrend in price action.
Raytheon Technologies
Near term support is in the region of its 2020 lows;
Near term resistance is in the region of 76.50;
Price smoothing: Flat to downwards sloping;
Momentum: RSI in bearish range;
Relative Strength: Underperformance relative to the S&P 500 and its sector;
Bearish evidence: Below 2018 lows, the current price is also below the 38.2% Fib level and in a clear downtrend
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside. Holding above its 38.2% Fib level and 2018 lows might slow the downwards price action.
Travelers
Near term support is in the region of 97;
Near term resistance is in the region of 114.50 & 61.8% Fib Level;
Momentum: RSI in Neutral range;
Relative Strength: Shorter timeframe relative strength with longer-term weakness;
Bullish evidence: LT trend is up;
Overall, this chart has a neutral appearance with a confluence of technical evidence pointing to further sideways price action. A break of the 38.2% Fib level and 2018 low will see further downside.
UnitedHealth
Near term support is in the region of 270 & 78.6% Fib level;
Near term resistance is at the all-time high from early June;
Momentum: RSI is in Neutral range;
Relative Strength: Short term weakness. However, longer-term outperformance relative to the S&P 500 and its sector;
Bullish evidence: UNH recently tested its ATH but drifted, 9% above 200-day simple moving average and LT trend continues to go higher.
Overall, this chart has a bullish appearance with a confluence of technical evidence pointing to further upside.
Verizon
Near term support is in the region of 54 & 38.2% Fib level;
Near term resistance is in the region of 55.50 & 50% Fib Level;
Momentum: RSI in bearish range;
Relative Strength: Underperformance relative to the S&P 500 and its sector;
Bullish evidence: LT trend is up;
Overall, this chart has a neutral appearance with a confluence of technical evidence pointing to further sideways price action. However, A break of the 38.2% Fib level and 2018 low will see further downside.
Visa
Near term support is in the region of 183 & 61.8% Fib level;
Near term resistance is at 197 & 78.6% Fib level;
Momentum: RSI in Neutral range;
Relative Strength: Short term weakness. However, strong longer-term outperformance relative to the S&P 500 and its sector;
Bullish evidence: HD's nearing ATH's, 6% above the 200-day simple moving average and LT trend continues to go higher.
Overall, this chart has a bullish appearance with a confluence of technical evidence pointing to further upside and looking to retest ATH's.
Walgreens Boots Alliance
Near term support is in the region 40;
Near term resistance is in the region of 50;
Momentum: RSI in neutral range;
Relative Strength: Clearly underperforming the S&P 500 and its sector on all timeframes;
Bearish evidence: Below 2018 lows and in a clear downtrend of lower highs and lower lows.
Overall, this chart has a bearish appearance with a confluence of technical evidence pointing to further downside. Holding above the 40 Fib level and 2018 lows might slow the downwards price action.
Walmart
Near term support is in the region of 117;
Near term resistance is in the region of 120.50;
Momentum: RSI in Neutral range moving into bearish ranges;
Relative Strength: Short term weakness. However, longer-term outperformance relative to the S&P 500 and its sector;
Bullish evidence: LT trend is up. ATH in April 2020
Overall, WMT has been stuck in a range for the past two years and is currently in the middle of that range. This market will continue to move sides until price tells me otherwise. Above 120.50 might help the upward trend.
Walt Disney
Near term support is in the region of 110.50 & 38.2% Fib level;
Near term resistance is in the region of 127.50 & 61.8% Fib Level;
Momentum: RSI in bearish range;
Relative Strength: Clearly underperforming the S&P 500 and its sector on all timeframes;
Bullish evidence: LT trend is up, past five years ranging market;
Overall, this chart has a neutral appearance with a confluence of technical evidence pointing to further sideways price action. However, A break of the 38.2% Fib level and 2018 low will see further downside.
Bottom line: What I am doing here is counting how many are bullish, how many are bearish and how many are neutral. If there are more bad ones than good ones, it’s hard for the equity market to do well. The opposite is also true. If more of these are going up, it’s hard for the equity market to fall.
By my count, I’d say about a third of these are entering or currently in bullish ranges with only 5 of them within the range of making all-time highs in the near term, including Microsoft, Apple, Nike, Home Depot and UnitedHealth. It’s hard to find too many longer timeframe downtrends on this list. However, on the shorter-term timeframes, the markets look neutral to constructive; nevertheless, lots more work is required from sectors like Energy, Financials and Industrials which are clearly lagging in the short-term, I would like to see more participation other than Tech companies going forward! For me, An attractive sector going forward is the Financials! Keep your eyes open! Thank you for staying with me over this long post!
Stay safe and good luck out there…
GH
P.S. All charts in this post are at EOD 25/06/2020
P.S.S Next week post will be ‘Dot Point Monthly’ which will include end of the quarter.
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