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The Dow Cracks Critical Support Level

If you still harbor doubt that the correction in the equity markets now is underway, then all you have to do is check out a price chart of the Dow Jones Industrial Average. Monday’s steep 300-plus point drop in the Dow sent the most widely watched measure of the equity market plunging below its long-term support at the 200-day moving average.

The decline in the Dow marks the first time in more than a year that the Industrials have broken their long-term uptrend, and that situation is a very bearish sign for stocks going forward. The only saving grace here for the markets is that the Dow so far is the only major market metric that has fallen beneath its 200-day average.

The S&P 500 Index continues to trade above its 200-day average, while the NASDAQ Composite also continues trading above its long-term support levels. I think that if we were to fall below the 200-day average, particularly in the broad-based S&P 500, that drop would be the biggest negative signal from the markets for a very long time.

Read more about what the Dow’s drop means for you and your investments at Eagle Daily Investor.

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The Dow Cracks Critical Support Level

Monday‚??s steep 300-plus point drop in the Dow sent the most widely watched measure of the equity market plunging below its long-term support at the 200-day moving average.

If you still harbor doubt that the correction in the equity markets now is underway, then all you have to do is check out a price chart of the Dow Jones Industrial Average. Monday‚??s steep 300-plus point drop in the Dow sent the most widely watched measure of the equity market plunging below its long-term support at the 200-day moving average.

The decline in the Dow marks the first time in more than a year that the Industrials have broken their long-term uptrend, and that situation is a very bearish sign for stocks going forward. The only saving grace here for the markets is that the Dow so far is the only major market metric that has fallen beneath its 200-day average.

INDU_020514

The S&P 500 Index continues to trade above its 200-day average, while the NASDAQ Composite also continues trading above its long-term support levels. I think that if we were to fall below the 200-day average, particularly in the broad-based S&P 500, that drop would be the biggest negative signal from the markets for a very long time.

Read more about what the Dow’s drop means for you and your investments at Eagle Daily Investor.

Written By

Doug Fabian is the editor of Successful Investing and High Monthly Income, and is the host of the syndicated radio show, "Doug Fabian's Wealth Strategies." Taking over the reigns from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert‚??s Investment Digest. For more than 30 years, Successful Investing (formerly the Telephone Switch Newsletter) has produced double-digit annual gains. Doug has become known for his expert knowledge and timely use of innovative tools like Exchange Traded Funds, bear funds and Enhanced Index funds to profit in any market climate.

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