In the August issue of InvesTech we called out the divergence amongst the Dow Indexes…
The Dow Divergence: Among the three Dow Jones Indexes –Industrials, Transportation, Utilities– the DJ Transportation average is considered the more economically sensitive and the DJ Utilities is the most interest-rate sensitive. As a consequence, they will often peak ahead of the DJIA (Dow Jones Industrial Average) at major market tops. So as the DJIA hit a bull market high earlier this month along with the S&P 500 Index, it is a potentially bad omen that the bellwether DJ Utilities are already off -6.8% from their February peak, and the DJ Transports have fallen -10.3% from their April peak.
InvesTech Research August 21, 2026
This dynamic has continued as the DJIA has now fallen -5% from its August high, while the DJUA is down -15% and the DJTA has dropped -18% from their respective peaks.
Market breadth is also sending an important warning as the InvesTech A/D Divergence Index has continued to collapse. This sustained and rapid breakdown in breadth means fewer stocks are participating in market gains, suggesting the troops are in full retreat.
Surprisingly, even as the DJUA and DJTA have fallen lower, the Nasdaq hit a new high just last week. But the warning is just growing louder! When these “bellwether” Dow averages peak noticeably before the broader market Indexes and continue to diverge, it is certainly worth taking note.
These internal divergences are important signals that should urge investors to build defenses if they haven’t already! The Model Fund Portfolio is already positioned for resilience, and the most recent increase in the Inverse Index (bear) Fund [symbol: SPDN] further adds to the Portfolio’s defenses.