Market Extra: Dow’s historic close above 23,000 belies a flicker of weakness

The Dow Jones Industrial Average punched firmly higher on Wednesday to a historic close above 23,000. It took 54 trading days for the gauge to close above the next round-number milestone, representing the third fastest 1,000-point advance in history.

However, the record-setting climb for the more than 120-year old stock-market average might hint at some softness.

That is because the Dow’s

DJIA, +0.70%

 close above 23,000 marks the first time it has taken more than one try to finish above a psychologically significant round-number level since the benchmark took three turns to end above 16,000 back in November 2013, according to research from WSJ Market Group Data (see chart below):

Of course, the strength of Wednesday’s rally may suggest that the Dow industrials may have further to room to run, but an inability to close the deal Tuesday may suggest that the upward momentum that has taken investors to repeated all-time highs may be waning—at least somewhat. After hitting 16,000, it took the Dow 153 trading days to get to 17,000 in July of 2014.

Technical analysts tend to focus on higher highs and gauges of momentum to determine if an uptrend remains intact. To be sure, focusing on how quickly the Dow can consolidate its gain around a milestone isn’t a traditional way such analysts measure trends, but it isn’t a point lost on them.

Frank Cappelleri, executive director of Instinet and technical analyst, said, while you might not read too much into the Dow’s failure to close out above 23,000, it is worth watching how the market holds up in the coming days.

“The DJIA pulled back for multiple weeks after first touching 20,000, 21,000 and 22,000. In other words, when the DJIA initially touched round numbers over the past year, short-term trading tops soon followed,” he said.

“While it could just be a coincidence, there is no coincidence that strong multiweek rallies preceded each round number visit. The same scenario is in play now, of course, and the market will have plenty to key off in the coming weeks,” he warned, pointing to reasons that could test the market’s foundation.

It is also important to note that Wednesdays’ gains for the blue-chip gauge’s components was relatively muted with the exception of International Business Machines Corp.

IBM, +8.86%

which contributed more than 90 points to the Dow’s advance after reporting hotter-than-expected quarterly results.

Moreover, overall market breadth was subdued, with MarketWatch editor Tomi Kilgore pointing out that the Arms Index, which is a volume weighted breadth measure that usually declines when the market rises, inched up to just 1.090 for the NYSE and to 1.021 on the Nasdaq exchange. An Arms reading of 1.000 means the ratio of advancers versus decliners is the same as the ratio of advancing volume over declining volume. Basically, it indicates that there is no sense of urgency to buy stocks that are rising.

The S&P 500

SPX, +0.07%

 and the Nasdaq Composite Index

COMP, +0.01%

also posted a muted finish, compared with its blue-chip equity peer.

—Peter Levin contributed to this article