Dow Jones Roundup - Technical and Market Breadth
This week played along with weak seasonality, providing no tailwind for the Dow Jones. After 4 trading days this week, losses have stacked up to ~ 2,16%.
Reason enough for us to have a quick look at the leading US index.
Dow Jones Technical Chart
Technical chart for Dow Jones created at tradingview.comAt first it looked like the zone around 34 900 might provide a level of support for the Dow Jones on its way down, but one trading day later the price fell through this area and landed on the trendline we've seen since mid of June.
The last time this trendline acted as a spring-board back to the top. Will it be the same this time? The chance could be higher that the Dow Jones will remain near the 34 900 area for a while than the other scenario we've seen last time, where another short-term rally was started.
On Friday, the upper boundaries of the lower Envelopes band crossed the trendline, so this was a strong indicator that the current downside movement would end up here (at least for now). Also, the Dow Jones is currently ~ 1,85% away from the SMA20, which is not so much, but the highest level when looking at the last 6-8 weeks.
Technically, the Dow Jones is on the verge of being oversold. There is a good chance that the index will see at least a small recovery during the next trading days.
Dow Jones Market Breadth Data
Dow Jones Market Breadth Chart provided by www.advance-decline.net
Regarding the Envelopes, I think I've already said enough. Not oversold yet, but the index is about to be if it declines any further.
The Advance Decline Line for the Dow Jones shows no clear divergence and follows the price movement.
The data for Advanced vs. Declined is weak. 5 days below the zero line.
The McClellan Oscillator for the Dow Jones marked a new low in our chart. In mid June, the indicator went down until ~ -3,6 and now it went down to ~ -2,6. So it's not the same extreme value compared to the dip in mid June, but it is worse than the dip in mid July. I like putting things into relation, so here is a another fact for you: Since the huge dip in end of October 2020, there were only few occasions where the McClellan Oscillator fell below 2,5: End of October 2020, mid of June 2021 and last Friday. So only three times within one year. What does this mean for the upcoming development? I am not sure. It could be that anti-cyclical traders have the chance of the year to buy the dip because reading the lines below, it makes me realize that it would take lots of bad things to turn this dip into a worse thing, such as a real correction or sell-off. It would estimate that the chances for a rebound or at least a sideways development are much higher than chances are for other scenarios. Maybe this marks the bottom for the current mini-consolidation.
The McClellan Summation Index for the Dow Jones also marked a new low in our chart. Looking at the data of the last 12 months (not visible in the chart above), it is indeed an extreme value, but end of June 2021 it actually reached an even more extreme value.
Summary
Taking the technical and the market breadth data into consideration, my personal impression that it would be unlikely that we see the price declining even more during the next days.
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