In our last update on the Dow, we noted that it had not only fallen through an important trend line but its SMA200 as well. From All Good Things on Oct 11:

DJIA is flirting with breaking below a long-term trend line and SMA200.  A failure here opens the door to 23781, another 6.2% lower.

Two months after the breakdown, DJIA is indeed flirting with the 2.24 extension at 23781.  Like SPX, it has completed a Head & Shoulders Pattern as well as a Flag Pattern.Also, like SPX, it came up just shy of its .886 Fibonacci retracement yesterday (23881 vs 23781.)

The big question, then, is whether it’s done or whether it’s simply preparing for a more dramatic plunge.

continued for members…As we’ve discussed before, DJIA recently broke out of a rising wedge, only to break right back in after reaching its 2.618 extension at 26702.The wedge, itself, also represented a breakout — of the rising red channel.  What’s fascinating to me is that the 2.24 extension (purple, at 18871) of the most recent drop is very, very close to the 1.618 extension at 18974.

Importantly, this extension was never backtested.  Not even close.

If we look at a close up, we can see that the intersection of these two Fib levels with the top of the rising red channel would occur around Mar 2019, the same time period during which a backtest of SPX 2138 might occur.

We discussed this last March as well.

Like SPX, [DJIA] 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.

And, if we transform the rising purple wedge into a channel, shown below in white, it fits with a 18871 tag in March 2019. Obviously, the mere fact that something fits doesn’t make it likely to happen.  But, if DJIA should happen to plunge below its purple .886 at 23755, I’d sure want to be short.Stay tuned…