I don’t look at the DJIA very often, as I consider it ridiculously corrupted and manipulated [see: Update on DJIA Nov 2016.]  But, once in a while, I’m reminded of how it matters.  This is one of those times.

On Feb 9, when SPX and ES were tagging their SMA200s, DJIA dropped only to 23,360, about 566 points (2.5%) away from its SMA200.  Thus, it was robbed of the opportunity to backtest important support.  Because stocks have been going sideways for the past two months, it finally got its chance yesterday — tagging the moving average in its plunge to 23,344.  It was a slightly lower low than in February, meaning that DJI has technically completed what many would consider a normal corrective wave (ES and SPX have not.)

Given that DJI latches on to any and every support it can find, what are the chances that it won’t bounce here?

continued for members…

In our last update [see: Update on DJIA Oct 4, 2017] we discussed the possibility of it reversing at overhead resistance.

There is no shortage of downside targets, but we’ll wait to see if it can break trend before getting excited about it. While I like the idea of a serious correction, I wouldn’t hold my breath.

The following day, DJI popped through the resistance.  I described it, then, as a channel midline.  But, I think it’s more interesting to view it as the top of a rising wedge.  Six weeks later, it popped through its 2.24 Fib and the top of an even larger rising wedge that dates back to 2009.  Ultimately, it arrived at its 2.618 Fib extension where it topped out and began its correction. As shown above, the subsequent drop has allowed it to tag SMA200 support.  But, it has also resulted in a drop back into the red and purple rising wedges.

I would expect it to find its way out, again, particularly if it can close today above its 2.24 at 23,781.  But, like SPX, it is susceptible to much larger losses if it fails to hold the SMA200.  The nearest real support if the red wedge breaks down is the purple wedge bottom (currently at 20,650) followed by the 1.618 at 18,974. 

Hey, in only 15 more months, the 1.618 will intersect with the broken red channel top and it can backtest both at the same time.  Naturally, look for TPTB to do whatever it takes to prevent that from happening.