Tell Tale Signs from the Dow Jones Averages

Sunday’s Profit Radar Report featured the following charts and analysis for the Dow Jones Averages:

Dow Jones Industrial Average (DJI):

The Dow Jones Industrial Average (DJI) appears to offer the most clues at this moment. The weekly bar chart shows double support (trend line and prior September high) right around 17,350 – 17,300. The 20-month SMA is at 17,198. This is not must hold support, but it’s a general zone worth watching for a potential bounce.”

Dow Jones Transportation Average (DJT):

The Dow Jones Transportation Average (DJT) broke above double trend line resistance (green circle) on July 29, but didn’t produce the ‘escape velocity’ needed to continue moving higher. In fact, the DJT has now returned to its original breakout trend line (blue circle). This kind of back test often serves of launch pad for the next spike. We’ve seen a few failures of a similar launch pad lately, but this is still one of the more reliable technical patterns.”

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Summary:

We don’t want to ignore some credible indicators pointing towards a correction, but based on sentiment (in particular the equity put/call ratio), it is hard to believe that stocks will drop hard. A bounce is more likely.”

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

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Bullish or Bearish? Dow Jones Averages are All Over the Place

All for one and one for all may have worked for the Three Musketeers, but it’s not working for the Dow Jones Averages.

All three Dow Jones Averages are pulling in different directions.

The Dow Jones Industrial is near its all-time high. The Dow Jones Utility just came off a nine-month low and the Dow Jones Transportation Average has been stuck in neutral for four months.

Here’s a look at all three averages and an attempt to interpret the meaning of the broad Dow Jones disharmony.

Dow Jones Utility Average (DJU)

The Dow Jones Utility Average (DJU) lost as much as 14% from January 28 to March 11.

On March 11, the Profit Radar Report noted that: “Utility stocks are down 13% from their recent high, and every stock component of the Utility Select Sector SPDR ETF (NYSEArca: XLU) is trading below its 50-day SMA. RSI is at a level that sparked rallies in June 2013 and August 2014. XLU trend line resistance is just below today’s close. Unlike XLU, the Dow Jones Utility Average already close below its trend line. Nevertheless, utility stocks are compressed and should soon spring higher.”

The latest rally started on March 12, and as long as support at 585 – 574 holds, DJU may continue higher.

Dow Jones Transportation Average (DJT)

The Dow Jones Transportation Average (DJT) has been stuck in a multi-month triangle, and is threatening to close below triangle support.

A break down below the ascending green trend lines has to be graded bearish (unless it reverses). Next support is at 8,800 and 8,600.

The iShares Transportation Average ETF (NYSEArca: IYT) tracks the DJT.

Dow Jones Industrial Average (DJI)

The Dow Jones Industrial Average (DJI) just fell below long-term Fibonacci support/resistance at 18,004, which is also where the 20-day SMA is.

This allows for continued weakness.

The SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) tracks the DJI.

Bearish Divergences?

The lack of confirmation among the Dow Average isn’t a bullish development, but thus far the key U.S. indexes are not displaying signs of a major market top (for more details about the indicator that’s identified the 1987, 2000 and 2007 tops go here: Is the S&P 500 Carving Out a Major Market Top?).

Until we get the same kind of deterioration seen at prior bull market highs, divergences among the Dow Average may just be a distraction.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.