The chart for the Dow Jones Industrial Average (^DJI) formed a rare “death cross” Tuesday, when it closed at 17,806.99, with a follow up to the downside on Wednesday, falling 1.4% during the early morning trading session. The move puts the Dow on track to suffer its ninth loss in the last 10 sessions and suggests the stock market may have already begun a new long term downtrend.
The Dow’s 200-day MA rose by less than two points on Wednesday, rose by nearly four points on Tuesday and rose by over five points on Monday.
Since its record close of 18,312.39 on May 19, 2015, the Dow has lost 6.3%. The DJIA has been moving steadily southbound since closing lower by 1.2% on Tuesday, down 5% since 19 May.
The appearance of the “death cross” on the DJIA chart, was the first time the 50 day moving average closed below the 200 day moving average, since 30 December 2011, according to FactSet.
Many traders follow the 50-day simple moving average of the Dow to track the short-term trend. A “death cross” is said to have occurred when the 50-day simple moving average crosses below the 200-day moving average - which is widely used to gauge the health of the longer-term trend.
According to FactSet, Tuesday marked the first time the 50-day moving average for the Dow was below the 200-day moving average, at 17,813.42, since Dec. 30, 2011.
Contributed by Millennium Traders