Closed-up image of 100 dollar banknotes.
To go along with the “20% sell-off from all time highs” narrative you’ve been hearing and reading about, it’s a further confirmation of the problem that well-known market indices have dropped below their monthly upward trend lines. Well, 3 out of 4 have.
Only the NASDAQ NDAQ Composite can be considered to be fully “up trending,” considered from this technical analysis perspective. The Dow Jones Industrial Average, the Standard and Poor’s 500 and the Russell 2000 small caps index have all sagged below what were previously positive trend lines.
The Dow Jones Industrials monthly price chart looks like this:
Dow Jones Industrials Average, monthly price chart, 4 2 20
The up trend is represented by the red dotted line from the Great Recession low of early 2009 that connects with the dip of early 2016. You can see that the tremendous amount of selling in March took the price to well below the trend line — before buyers came in and brought it back to just barely above it. The Ichimoku cloud remains green but the question would be: for how long given the downside penetration?
The S&P 500 monthly is here:
S&P 500 monthly price chart, 4 2 20.
Just about the same picture as the Dow 30, the larger group within the S&P index took out the up trend line and then managed to close just above it. The red dotted line shows it by connecting the 2009 low with the dips in late 2011 and in early 2016. Note that on this chart as well, the price made it below the green Ichinoku cloud, however briefly.
Here’s how the Russell 2000 small cap index looks:
Russell 2000 ETF monthly price chart, 4 2 20.
It’s pretty clear that this index did not hesitate at the up trend line that connects the 2009 low with the early 2016 dip. The small cap index took out that line decisively, closed below it and remains there as we take on a new month. You can see that the Russell is now sagging below the Ichimoku cloud too.
The NASDAQ Composite looks like this:
NASDAQ Composite monthly price chart, 4 2 20.
It kind of gives off a “what me worry?” vibe, doesn’t it? I mean, when compared to the other 3 charts. This is the index that contains the big name tech stocks such as Apple AAPL and Microsoft MSFT . The huge selling of stocks in March did not take this index below the monthly uptrend line. You can see the extraordinary level of volume — below the price chart — it’s that big red bar that sticks out higher than any previous volume bar.
What a difference the make-up of an index makes. Small caps get pounded the hardest — and the tech sector, represented by the NASDAQ, seems to hold up on a monthly basis despite the incredible March rout.
I do not hold positions in these investments. No recommendations are made one way or the other. If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.