Dow Jones Industrial Average Relative Strength Sinks to Bull Market Lows

When you hear a reference to how the market is doing on the news, it is pretty common for the report to reference the performance of the Dow Jones Industrial Average.  The Dow is a price-weighted measure of 30 U.S. blue-chip companies. It covers all industries with the exception of transportation and utilities. While this index is not as broad a representation of the US economy as the S&P 500, the Dow's performance typically tracks the S&P 500 pretty closely. 

Recently, however, the blue-chip Dow has been a notable laggard compared to the broader S&P 500. 

The chart below shows the relative strength of the DJIA vs. the S&P 500 over the last ten years.  When the line in the chart is rising it indicates the DJIA is outperforming, and when the line is falling the DJIA is lagging.

 

via Bespoke Investment Group.

 

As you can see, in the last several months the DJIA has been underperforming to such a large degree that the relative strength vs. the S&P 500 is at its lowest levels since the depths of the Financial Crisis.

Do you take that as a bullish sign for the broader market, or early indicator that we are in for a lull before the next move up?

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