Deceptive Dow Jones Masks Poor Market Conditions
The DJIA is running deeper into new high territory as the broader market struggles.
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The Dow Jones Industrial Average (DJIA) is running deeper into new high territory, while the broader market struggles amid weakness in the Magnificent Seven (MAGS) and technology in general.
The DJIA is a mainstay of financial media, but professional money managers widely ignore it because of its construction. The DJIA is a price-weighted index, meaning that the stocks with the highest prices receive the most weight. Most indices, such as the S&P 500, are capitalization-weighted. For example, Nvidia (NVDA) is the largest capitalization stock in the market and has the greatest weight in the S&P 500, but it is currently trading around $192, which means it would only be the 20th stock out of 30 in the DJIA.
That isn’t very logical, but it explains why the DJIA is doing well on Wednesday. Two of the highest-priced stocks in the DJIA, Goldman Sachs (GS) and Caterpillar (CAT) , have large gains. That more than outweighs Microsoft (MSFT) , which is down but has a larger market capitalization than both.
As I discussed on Tuesday, there are some unusual flows taking place with biotechnology continuing to run higher with a gain of 0.8% while the Magnificent Seven are down 1.1%. Breadth is good with 62% of stocks higher, but there aren’t too many pockets of speculation currently.
Readers asked me for updates on the stocks I’ve discussed in the past.
Xeris (XERS) is trading lower after a solid report. There is some uncertainty about 2026 revenue estimates, and it will take a while to develop its blockbuster drug, which won’t be commercialized for a couple of years. There isn’t any immediate catalyst, but there are some investment conferences coming up where management should provide some guidance. I’ve reduced some and am holding a core position that I will add to as conditions arise.
Humacyte (HUMA) was an extremely disappointing name. It suffered from insider selling and a delayed approval from the FDA. It is now selling its artificial vein product and is moving ahead on several other applications, but it is a slow process. Hospital sales are also a slow process, but they are making progress. I believe the worst has been fully discounted, and there is good support, but there is probably limited upside in the near term until there is more news flow. I have a position, but am not doing anything with it right now.
Rocket Pharmaceuticals (RCKT) is another disappointing name that suffered from the death of a patient in a trial and then had to contend with an FDA that was suddenly unfriendly to gene therapy. The company is still moving ahead, and there is some support, but like HUMA, it needs some positive news flow to move it along. I have a small position and will continue to watch it.
Another stock I highlighted not long ago was CorMedix (CRMD). On Wednesday morning, it reported Q3 EPS of $1.26 versus consensus estimates of $0.63 and Q3 revenue of $104.3 million versus consensus estimates of $86.02 million. These are great numbers, but there isn’t any clear 2026 estimate at this point due to uncertainty about reimbursements from Medicare and Medicare Advantage. This uncertainty is keeping investors on the sidelines. I believe that the stock is worth substantially more and that there will be greater clarity in a few months, so I’m adding to my position and trading it aggressively.
I am not feeling very optimistic about overall market conditions, but there are trading opportunities out there like CRMD. I’ll be sticking with those while waiting for some trend trades to develop.
At the time of publication, DePorre was long XERS, HUMA, RCKT and CRMD.
