December 29, 2022; Even though it has been a rough week for stocks the weekly analysis discussed over the weekend indicates that the Dow Jones Industrial Average is still acting better than the S&P 500 or the Invesco QQQQQQ Trust (QQQ).
With the close on December 28th, the Dow is down 4.6% while the S&P 500 has dropped 7% and the Nasdaq 100 has declined 11%. This better relative performance was signaled by the weekly relative performance weekly (see chart).
When a market average is outperforming the other key benchmarks then stock pickers look at its components for new opportunities. For the Dow Jones Industrial Average, one interesting way to approach is the Dogs of The Dow strategy popularized by Michael B. O'Higgins in a 1991 book.
The strategy according to Wikipedia has a mixed record and focuses on the ten stocks in the Dow Industrial average with the highest dividend. The list ranges from Verizon CommunicationsVZ (VZ) yielding 6.68% to Goldman Sachs (GS) which yields 3.22%.
I looked at the weekly charts and technical studies on all of the stocks on this list and there are two that look the best with two trading days left in the year.
AmgenAMGN Inc. traded above its weekly starc+ band for four weeks in a row in October and November as it had a high of $294.64 before correcting back to $262.88. The long-term support, formerly resistance at line a, has been tested. The 20 week EMA is at $260.94. The tentative January pivot is at $270.22 with further resistance in the $275 area.
The weekly relative performance (RS) broke its long-term downtrend, line b in late 2021. This was a sign it was becoming a market leader. The RS has been in a solid uptrend, line c, since then and has just pulled back to its rising WMA. The RS did confirm the breakout above resistance.
The weekly on-balance-volume (OBV) shows a pattern of higher highs but dropped below its WMA last week. A decisive drop below the support at line d would be more negative. A move back above its WMA would be a sign that the correction is over. The daily indicators (not shown) are still negative which indicates that the correction is not over yet. A close above the tentative monthly pivot at $270.22 would be a positive sign.
ChevronCVX Corporation (CVXCVX) has a yield of 3.38% and had been testing the support at $165.55 along with the rising 20 week EMA. On December 23rd CVX closed above the weekly doji high (see arrow) and triggered a weekly doji buy signal.
CVX is up slightly this week with next resistance in the $180-$183 area. The November high was $188.22 with key resistance at $189.99, line a. A strong close above this level would complete the trading range with the weekly starc+ bands at $204.14. The chart formation has initial targets in the $210-$215 area.
The weekly RS bottomed in early 2022 as it moved strongly above its rising WMA. It recently tested its WMA and the support at line c, before turning higher. A drop below the most recent low would be a warning.
The OBV moved back above its WMA in October after completing a long term bottom a year earlier in 2021. The uptrend from the lows, line e was tested in the fall before CVX turned higher. The OBV is now trying to breakout above the resistance at line d, as it is starting to act stronger than prices. The daily indicators (not shown) are mixed as the RS is positive but the volume is slightly negative.
There are three other of the Dow’s top yielders that I am watching, they are Verizon Communications (VZ), Cisco SystemsCSCO (CSCO) and Goldman Sachs (GS). If the Dow Jones Industrial Averages closes above 34,750, I will update the analysis as more of the weekly charts are likely to look strong.
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