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Wednesday, July 12, 2023

Looking at this rally on the DOW

 It was hard not to notice yesterday's action on the Dow, after listening to at least half a dozen talking heads on CNBC talking about how great yesterday's "rally on the dow" was. 

$INDU - The Dow is jacked above the 34k level. CNBC hypes the story.

I've been pounding the table on the dow for several months, because - as I said at the time - "the Dow lags", yet the dow has continued to trade in the same range for the entire year, and yesterday's rally doesn't change that.  

Last time we saw the Dow trading at this level was not that long ago - in fact it was June 13th, 2023, where I covered the DOW in this (linked) market update.  

"Yesterday was an interesting session, as we saw the $INDU (Dow Jones Industrial Average) run back up to precisely the 34k level/target (close to the top of the range...). I didn't notice that until after the closing bell, because I was busy struggling with my monitor settings, after recently upgrading windows to version 10 - but in hindsight that Dow target helped lift big tech even higher. I say, "even higher", because - as you probably know - big tech has been on a tear since early May. 

I remember calling out these (hedgefund) trolls - on Twitter - like it was yesterday: 

 If you look at the Dow chart, I included in that tweet, this does indeed look like another 1 day breakout, but we've been watching the Dow flirt with these levels for several weeks/months. 

Why does CNBC decide now is the time to circle the wagons around the Dow? 

Looks like a bad case of, "let's pump another sector", since the AI story has apparently dried up.    

Fake News to support the rally 

Barron's offers a clue - from of all places - AFP (Agence France-Presse) news  

Dow, S&P 500 Gain Amid Signs Of Broadening Market Rally 

Going to the charts: 

Of course I have a good handle on all the Dow components, so I knew exactly where to look. 

$BA (Boeing) is one of those names that has long been used to drive the broader market. If you recall Boeing led the Covid crash, way before anyone had heard of the virus. 

Looks like another 1 day breakout, although this one had some volume behind it. If nothing else, this was a coordinated pump job. 

$MMM - This happens to be the number 1 chart in my charts folder, so this one was easy to find.

It's certainly too soon to call this, "a trend reversal", but this I can tell you; I'd certainly rather own this beaten down, and way oversold name, than Microsoft - trading at these levels! Resistance is obviously the 102.88 level. 

Of course Microsoft is a Dow name. No coincidence. 

$MSFT At close: July 11 04:00PM EDT 332.47+0.64 (+0.19%)

Pre-Market: 08:19AM EDT 334.34 +1.87 (+0.56%)

Sales Force, Walgreens Boots, $CAT, Nike, and even Disney were up. I like 3 of these names, and to find out which 3... remit $99 to my Paypal. 

Here's one to watch, McDonalds! 

Unbelievable what it costs to eat at McDonald's these days, and that's not going to change, any time soon. Prices are not coming down, no matter what the fed says they're going to do. More on that in another time. 

To be honest, this doesn't look like a breakout on the Dow, and even if it is, I can't confirm it until we see some momentum, and I don't believe we're going to see that, with earnings season just around the corner. 

What we are far more likely to see - ahead of earnings - is profit taking, in order to raise money, in order to buy oversold names, in yet another sector rotation. 

We already saw a bit of a pullback in Germany, but the US seems to be a little late to the party. 

Take Care, AA 

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