Modernizing Dow's Legacy: Relative Strength Analysis of the DJIA and Its Components

The Dow Jones Industrial Average (DJIA) is a widely followed index, representing 30 major U.S. companies across various sectors like technology, healthcare, and finance. As a price-weighted index, its value is driven by the stock prices of its components, with higher-priced stocks having a greater impact. Created in 1896, the DJIA is a key gauge of the U.S. economy, offering insights into market trends and investor sentiment. This analysis will focus on relative strength, examining the internal strength of the DJIA's components and the performance of its highest-priced stocks, which have the most influence on the index's movement. Charles Dow, co-founder of Dow Jones and creator of the DJIA, also developed Point and Figure Charting, a method to track price movements without the distraction of time or volume. His method used "X"s for upward price movements and "O"s for downward movements, focusing only on significant price shifts to provide a clearer view of market trends and underlying strength. Dow's Point and Figure method laid the foundation for modern technical analysis, which continues to prioritize price action. SIA Charts builds on this by using relative strength analysis powered by millions of Point and Figure comparisons through advanced computing. This enables deeper analysis of price action, identifying key support/resistance levels, trend lines, and breakouts with precision. By combining Point and Figure charting with AI, SIA Charts offers real-time insights into trend strength and price patterns, helping investors make informed decisions based on Dow’s time-tested principles, now enhanced for the modern market.

Before we dig into the components of the DJIA, let’s first take a snapshot of the SIA Dow Jones Industrial Average Point and Figure (PNF) chart to get a sense of where we’ve been and the potential moves for 2025. The very first thing we wanted to do in this analysis was to identify the top-side resistance, where we highlight the two double-sided blue arrows. The lower arrow considers the prior trading range from 2021-2024, where the DJIA appeared to be range-bound between 28,999 and 36,456. However, in early 2024, the average broke through this level with a move to 36,821. The upper blue arrow then counts 24 boxes higher on this 1% scaled chart, resulting in an upper resistance level of 46,752, which is approximately 4.5% above current levels. Near-term resistance is also at the lower red line at 45,377, a level that was recently tested before being met with selling resistance, marked by Charles Dow's column of O's. Shares have again pushed into a column of X's as demand regained control, putting support at 42,748, the 3-box reversal level. Also notable is the intermediate uptrend line formed during prior pullbacks, with support converging at 41,490—a level technicians should monitor for any shifts in sentiment. Meanwhile, the DJIA still holds a high SMAX score of 9/10, which may indicate near-term strength but also serves as a cautionary signal for any potential slippage.

Turning our attention to the internals, we’ve clipped the entire SIA Dow Jones Industrial Average Report from the SIA platform, and there are several important points to highlight. First is Walmart (WMT), with an impressive 96.74% SIA rank reading and strong performance, delivering a return of 85.33% over the past year and 15.11% year-to-date (YTD). In second position, Goldman Sachs (GS) follows with similar one-year numbers and an even better YTD return of 16.68%. JP Morgan Chase (JPM), a financial peer, is ahead of GS YTD with a 17.09% return. Amazon, IBM, American Express, Visa, and Salesforce round out the favored zone of this key SIA report, all posting excellent returns. However, there is a noticeable drop-off in SIA rank as we move into the SIA Neutral Zone, and further into the SIA Unfavored Zone, where we find very poor ranks and, in some cases, disappointing YTD returns. Notably, Merck (MRK) has been a big loser, with a -13.95% YTD return. As mentioned earlier, the DJIA is a price-weighted index, meaning higher-priced stocks have a greater impact. Sorting by price, we see that of the highest-priced companies in the index, only three are currently in the favored zone of the report: American Express (AXP), Visa (V), and Goldman Sachs (GS). This highlights the fact that while the DJIA is moving higher, it’s largely driven by some of the lowest-priced stocks—7 out of 10 components. Alternatively, we could frame this differently: the strength of AXP, V, and GS, with commanding SIA rank scores of 88.66%, 80.90%, and 94.67% respectively, is playing a crucial role in driving the index forward.