Wednesday, August 6, 2014

INDU Dow Industrials Daily Chart 150-Day MA Turns Negative Signaling Cyclical Bear Market

Remember last week when the RUT 150-day MA slope turned negative ushering a cyclical bear market for small caps? That negativity remains firmly in place and now the Dow 150-day MA has sloped negative as of yesterday ushering in a cyclical bear pattern forward. The last four 150-day MA end-of-day numbers are; 16484.08, 16484.17, 16484.78 and 16484.28. Bingo. See how the difference was 9 pennies, then 61 pennies after the market recovery move, then yesterday a drop of 50 cents creating a negative 150-day MA slope for the first time in over two years. The next few days are critical, like RUT last week, to see if the negative slope sticks, or not.

The Dow and RUT are now in cyclical bear patterns but the SPX and Nasdaq are not. Keystone uses the SPX 150-day MA slope as the major indicator of cyclical bull versus cyclical bear and the 150-day MA continues higher maintaining the cyclical bull. The broad equity markets are officially dead when the SPX 150-day MA rolls over and slopes negative.

The chart above shows price reverting to the mean after printing the lofty levels above the moving average's ribbon. The tight standard deviation band squeeze eight days ago results in a smack down. Price has violated the lower band so a move back to the middle band, the 20-day MA at 16915, and dropping is in play. The 16700-16750 resistance level provides an attractive target for a relief rally since the 20 and 50-day MA's will also venture down towards this area creating a confluence with horizontal resistance. The 200-day MA support at 16333 is an attractive area for a potential bounce.

The indicator are weak and bleak except for the RSI and stochastics wanting a bounce. The RSI is not yet oversold. Price will want to bounce but then will also want to come down for another look at the lows to properly set up positive divergence. In the near term it will be interesting to see if the 200-day MA can hold, or not. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

Note Added 11:28 AM:  The Dow 150-day MA is currently at 16483.25 which would maintain the negative 150-day MA slope.

Note Added 8:10 AM on 8/8/14: The Dow 150-day MA's over the last several days are; 16484.08, 16484.17, 16484.78, 16484.28, 16483.39 and 16482.90. This is a rolling over and steady down trend developing locking in a cyclical bear market ahead for the Dow with each day. Keystone got mixed up on the reading a couple days ago and thought the slope recovered but it did not. The Dow is negative on the year. The RUT 150-day MA continues lower verifying the cyclical bear market now in place for small caps. The RUT is also negative on the year.

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