When Dow Finds Itself in Times of Trouble

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Whisper Words of Wisdom –The Beatles

Did Mother Mary come to us when she whispered, “Let it Be?” Certainly, she tried her darndest to whisper to the bulls as the Dow (DIA) was the first to telegraph WARNING last June.

I love Phases. All kinds. Take Sunday’s Blood Moon, for example. Aptly named considering the market action, the moon’s cycle from new to full is a phase we can all take for granted.

But what about the Phases of the Dow?

Not as easily taken for granted except in hindsight. Yet…

During the spring into summer, the Dow (remember Terror at 18k in the Dow written March 29th https://mish.marketgauge.com/treehouse-of-horror-iv/ and then again referenced on May 3rd https://mish.marketgauge.com/those-magnificent-men-in-their-flying-machines/ ) did indeed take on a Mother Mary sort of role when it whispered Warning deteriorating into Distribution with the ultimate death cross in August (before the meltdown).

Beginning in December 2014, the Dow (DIA) vacillated between a warning and a bullish phase (closing and confirming both warning and bull phases) 16 times.

This erratic action where phases change that often are typically a sign of an upcoming sea change or watershed event.

The Dow’s ultimate demise finally reconciled in July when the 50 broke below the 200 DMA and the Dow became the first index to go into a “Death Cross”.

The rest, as they say, is history.

Many traders look out further than just the 50 and 200 daily moving averages to assess the phase and weakness or strength of the market longer term.

Weekly and monthly charts inform us about the phase going out 4 to nearly 7 years. Most economic cycles complete in about 7 years.

Sticking with the Dow, the 200 week moving average, tested on August 24th, indicates that should the 154 area hold, perhaps this was the 10% correction many anticipated with this solid level of support just below current levels, enough to keep a bullish trend intact.

Going to the month chart, the 2-year moving average broke down when it failed 170 in the Dow. Should the Dow hold the 200 week MA and return over 170 that would be a good sign.

Conversely, the nearly 7 year moving average support comes in significantly lower at around 133. Logically, one might expect that if the 200 week moving average breaks, the Dow price, like metal to a magnet, will fall down to that level.

“And when the broken-hearted people
Living in the world agree
There will be an answer, let it be.”

S&P 500 (SPY) 173 area the 200 week moving average with 197 the above month moving average

Russell 2000 (IWM) Broke the August low which means unless this clears over 108.26 expect 102.50 could be next

Dow (DIA) 160 minor support. Over 164.00 could help the rest of the market. Then, we are looking at 154

Nasdaq (QQQ) 98.70 monthly chart support-if defends that’s one thing. If not, down to the 200 weekly moving average we go.

KRE (Regional Banks) Safe for now and holding 40.20-40.50-one of the best places to look at if the market holds

SMH (Semiconductors) 47.55 support, 50 resistance and pivotal

IYT (Transportation) At September low but not yet to the August 24th low

*IBB (Biotechnology) HUGE volume nearly 6 times normal and perhaps the most volume ever! Blow off? 284.16 the August 24th low. Monday low 285.53. Before we chant double bottom, Big Bro has to close this month over 292 and get follow through early October.

XRT (Retail) Doesn’t look like we will get that monthly close over 45.38 to keep hope alive

IYR (Real Estate) 200 week moving average 68.63-key!

ITB (US Home Construction) 25.95 important to hold

GLD (Gold Trust) That 100 DMA turned out to be good resistance-til that clears aside

USO (US Oil Fund) Waiting for 15.00

TAN (Guggenheim Solar Energy) Broke August 24th low.

TLT (iShares 20+ Year Treasuries) Earlier I wrote about erratic price activity up and down changing phases a lot. Sea change coming-problem is not sure what

UUP (Dollar Bull) 25.00 pivotal and over 25.17 clears the 50 DMA

EWG (Germany) 24.22 if holds and this clears over 25.03-now that would be something

CORN (Corn) Over 24.00 gets real interesting

DBA (PwrShs DB Ag Fd) Waiting for it to clear 21.52

DBC (DB Commodity Index) Like better if can clear/hold over 15.25

SGG (Sugar) confirmed phase change to Recovery