Market on Verge of Dow Theory Bear Market Signal

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Stocks fell in a broad retreat on Wednesday as investors voiced concerns about slowing growth in China and its impact on the U.S. economy.

Even new product announcements by Apple Inc. (AAPL) CEO Tim Cook couldn’t turn the tide of selling, and the stock fell 1.9% on higher-than-average volume. Apple’s suppliers were also hit. QUALCOMM, Inc. (QCOM) fell 1.6%, Skyworks Solutions Inc (SWKS) and Avago Technologies Ltd (AVGO) each dropped 1.5%, and STMicroelectronics NV (ADR) (STM) was crushed for a loss of 6%.

Energy stocks fell 1.9% along with the price of oil due to a report that U.S. output fell to a nearly one-year low. Crude futures dropped 3.9% to $44.15 a barrel.

The U.S. dollar gained 0.2% against a basket of currencies, but the euro closed at $1.1215, up a fraction. Gold was down 1.6% at $1,102.20 an ounce.

At Wednesday’s close, the Dow Jones Industrial Average fell 239 points to 16,254, the S&P 500 was off 27 points at 1,942, the Nasdaq lost 55 points at 4,757, and the Russell 2000 was down 14 points at 1,148.

The NYSE traded total volume of 3.6 billion shares, and the Nasdaq crossed 2 billion shares. On the Big Board, decliners outpaced advancers by 2.9-to-1, and on the Nasdaq, decliners led by 2.2-to-1.

Dow Jones Industrial Average Chart
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Chart Key

Wednesday’s tape action, with a closing sell-off, almost sealed the case for the bears. What appeared to be the formation of a right triangle (coil) has, with Wednesday’s reversal, evolved into a bearish ascending triangle.

This formation almost always breaks lower, and this puts the August closing low of 15,666 in danger of being penetrated.

Dow Jones Transportation Average Chart
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The ` Dow Jones Transportation Average issued one of this year’s few sell signals from my proprietary indicator, the Collins-Bollinger Reversal (CBR). It was triggered in the last half hour of trading by a failed test of the 50-day moving average at 8,131. Now a test of the closing low at 7,467 is likely.

Conclusion

The Dow Jones Industrial Average and Dow Jones Transportation Average are in danger of triggering a Dow Theory bear market signal. Wednesday’s failure to rally places them in a position for a double violation of the August closing lows.

Our S&P 17-month moving average chart, published on Sept. 1, would be confirmed by a new Dow Theory bear signal.

So, even though he has not yet emerged from his cave, the bear is roaring his terrible roar.

Today’s Trading Landscape

To see a list of the companies reporting earnings today, click here.

For a list of this week’s economic reports due out, click here.


Article printed from InvestorPlace Media, https://investorplace.com/2015/09/daily-market-outlook-market-on-verge-of-dow-theory-bear-market-signal/.

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