Danger Signs are Clustering in the Dow Jones

A breakdown may not be imminent in the markets, but use caution

By Anthony Mirhaydari, InvestorPlace Market Strategist


U.S. equities continued their steady climb on Monday with the Dow Jones Industrial Average notching its ninth consecutive record close and its tenth consecutive gain. I guess they outlawed selling.

Headlines were quiet. The definition of the summertime doldrums.

In the end, the Dow Jones Industrial Average gained 0.1%, the S&P 500 gained 0.2%, the Nasdaq Composite gained 0.5%, and the Russell 2000 gained 0.1%. Treasury bonds were mostly stronger, the dollar was weaker, gold was little changed and oil lost 0.4% as OPEC members met in Abu Dhabi to discuss compliance issues with the cartels output cut pact.

Breadth was negative as selling pressure accumulates below the surface, with decliners outpacing advancers by a 1.1 to 1 ratio. NYSE volume was at 91.5% of the 30-day average. Consumer staples led the way with a 0.7% gain while energy stocks were the laggards down 0.9%.


Click to Enlarge

As mentioned, the breadth situation just continues to get worse. Hindenburg Omen signals have been clustering in the Dow Jones Industrial Average — due to the weakness of stocks like General Electric Company (NYSE:GE) and International Business Machines Corp. (NYSE:IBM) — to an extent not seen since October 2000 according to SentimenTrader.

Now, the same problem is infecting the Nasdaq.

Over the past week, the Nasdaq has triggered a Hindenburg Omen every day (defined as 2.2% of stocks hitting a 52-week high or low). The streak of six straight days is the second-most in at least a decade. The only others that equaled this were May 17 and June 28, 2007 and Aug. 5, 2015. Both were preceded by periods of intense market weakness.

Adding to the oddities in play right now is the lack of volume: Monday was the first time ever that the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), the single most popular ETF in the world, recorded a new 52-week high on the lowest volume in a year when it wasn’t around a holiday.

There’s just no other way to say it: We are truly in an unprecedented environment. And the dangers to investors are extremely high.

Check out Serge Berger’s Trade of the Day for Aug. 8.

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.

Tell us what you think about this article! Drop us an email at editor@investorplace.com, chat with us on Twitter at @InvestorPlace or comment on the post on Facebook. Read more about our comments policy here.

Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.

Article printed from InvestorPlace Media, https://investorplace.com/2017/08/dow-jones-industrial-average-danger-signs/.

©2018 InvestorPlace Media, LLC