Dow Breaks Below 200-Day Moving Average and Previous Swing Low

  • Larry Kudlow affirms Trump administration’s “no retreat, no surrender” stance on China.
  • Yield curve has flattened.
  • The US Dollar and oil are moving higher.
  • Stock market is declining.

 

DJIA-6-27-18-300x282 Dow Breaks Below 200-Day Moving Average and Previous Swing Low

 

For the sake of convenience, we start our count with the February 27, 2018 high at $25,800. For our purposes, specific prices are not relevant, as we’ll be referring to the swing highs and lows.

Numbers (1) through (5) illustrate a clear down-trending market. Note that (4) is a bounce of the 200-day moving average (MA), a technical event that we covered in a previous article. Basically, the 200-day MA is a long-term measure of trend strength; it’s violation indicating the possibility of a trend change or reversal.

Prices bounce off the 200-day again at (6). Note the color change. The reason for this is that in a “technical” downtrend, the swing low at (6) would have established a low below (4). But in this case the 200-day MA might have served as a support level, a point at which buyers saw fit to enter long positions.

Because the previous swing high at (5) had been exceeded by (7), we see (7) through (9), no color-coded green, as an up-trending market regardless of how small a scale it might have been. What was critical for this uptrend to continue is that the price level of the previous swing low a (8) would have remained untouched, OR that the 200-day, if tested would be followed by a bounce.

But price closed below the 200-day MA at (10). Currently, price is trading below the 200-day. Should price fail to break above (9), and should price, after moving above (10), break below that level as well as the 200-day, then we see a technical downtrend.

Stay tuned for further technical updates.

 

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