INDU Dow Industrials Daily Chart; Death Cross; Death Crosses on Dow (INDU of DJI), Nazzy Comp (COMPQ) and Nazzy 100 (NDX) with the S&P 500 (SPX) On Deck

The Dow Jones Industrials Average, the Dirty Thirty that the American public is familiar with, prints a death cross. Oh no! Take cover! Whozzit? Whazzit? A death cross. Protect the women and children! Batten down the hatches! A death cross sounds scary and theatrical but it is simply another technical analysis tool to assess a stock or index. The S&P500 (SPX) is the United States stock market. The Nasdaq indexes are more heavily weighted with high-flying tech and biotech stocks.

The comical thing about death crosses is that many folks think the pattern will immediately usher in doom and gloom sparing no one. As Keystone has mentioned many times, typically, a stock or index will pop when the death cross occurs. This is because a lot of negative time was needed to create the death cross and by the time it happens, price needs at least a dead cat bounce.

The SPX drops for 2 months before the 50-day MA stabs down through the 200-day MA creating the death cross. Price would be due for a bounce. The key about death crosses is the sustainability. When the death cross occurs, a bounce is expected. Watch the cross to see if the negativity remains. Each day that the death cross remains in play is another heavy-duty nail pounded into the bull's coffin. As a death cross lingers, it does portend bad things ahead since the bull's casket will be nailed shut.

Let's see if the Dow is ready to pop. During February, price drops faster than a prom dress, and as price comes down for the low, the chart indicators are all positively diverged except for the weak and bleak MACD. This, along with the oversold RSI and stoch's, tells you that price needs to bounce (green arrow) but it will likely come back down again, on the daily basis, because the MACD is not done with its negativity. Price pops higher for a few days and rolls over coming down for another low.

With the price low 4 days ago, the RSI is possie d and ready to rock higher. Ditto the histogram, stochastics and money flow. But look at that pesky MACD (pronounce it mac-d). It remains weak and bleak wanting price to come down for another low again after a pop higher (red line). Price pops higher for a couple days and on Friday slumps over to the 32944 closing price.

Note how all the indicators are sloping positively (little thin green lines) right now making bulls salivate. However, this is not possie d. It is not positively diverged because price has not made a lower low again (price has to make a lower low while indicators move higher creating the positive divergence). If the Dow was inside the green circle, it would be possie d and ready for a rocket launch higher. It is not. But it can be. If the Dow comes down into the green circle, and maybe tags the lower band at 32380, and all the chart indicators remain sloping higher as shown by the little thin green lines, the Dow will be ready for a relief rally on the daily basis.

Interestingly, the Dow did bounce a little already when the death cross occurred but a far more substantive bounce typically occurs after a death cross. Thus, the technical analysis above jives with the expected bounce that should occur after the death cross. The 20-day MA is at 33748 and this would need tagged, at a minimum, for any relief rally that occurs on this daily basis.

If there is positive news in Ukraine, or on the oil front, the Dow can take off higher from here, but as the chart shows, it really wants price to come down again to check that low from 4 days ago. The green circle is a buy as long as the chart sets up with possie d.

Keybot the Quant is on the long side currently while Keystone is holding many short index positions. A sustainable relief rally, on the daily basis, may set up as described so that will require a decision with any shorts that are held.

The Dow weekly chart is not happy talk because the RSI, MACD, histogram and stochastics are all weak and bleak wanting to see lower numbers for the Dow on a weekly basis. Thus, if the Dow comes down into the green circle and there is possie d, and you want to go long, and are ready to rock n roll, like AC/DC, on the daily basis, play it long but do not marry the trade. The Dow will likely roll back over after the rally occurs on the daily basis and then come down for the lower price low on the weekly basis, to satisfy the negativity on the weekly chart, say 1 to 3 weeks out.

So be nimble if you play the long from the green circle. The trade is on the daily basis but the weekly period remains negative. A more substantive multi-week relief rally will occur when the weekly chart sets up with possie d but that will probably take another month. Trading technically is like 3-dimensional chess but instead of the 3 levels, you must comingle 5 time frames into a broad-based analysis; minutes, hours, days, weeks and months.

The S&P500 may show its death cross tomorrow. 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.