Today was a great example of how effective relative strength analysis can be when trading the indices. Above is a 5-minute chart of the DIA, with the SPY shown in the lower pane for comparison. Around 12:00 ET, the market sent a very clear message if you knew where to look. While the SPY was pushing to new intraday highs, the DIA was unable to confirm that strength and instead was making a much lower high.
That divergence is classic relative weakness. When the broader market is strong and one index lags, it often signals distribution under the surface. In this case, the weakness in the Dow Jones Industrial stocks stood out clearly. Money simply was not flowing into those names the way it was into the broader market, and price was telling that story well before any major move unfolded.
As the session progressed, the DIA eventually broke its intraday low, which acted as support. Once that level gave way, the selling pressure increased and the DIA continued trending lower into the close. There was no need to predict or guess. The relative weakness had already done the heavy lifting by identifying where the market was vulnerable.
This is why I rely so heavily on relative strength and relative weakness in my trading. It helps filter out noise and keeps me focused on where money is actually moving. Days like today are a reminder that price relationships between markets often matter more than headlines or indicators. When one index can’t keep up with another, it’s usually worth paying attention.
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