Dow Jones Falls Below Key Level
Wall Street Sector Selector | Feb 22, 2014 02:29PM ET
The Dow Jones Industrial Average (DIA) and other major U.S. indexes slipped into the red on Friday to close out a down week.
The Dow Jones Industrial Average (DIA) finished just below a key level, the 50 day moving average, on Friday while the SP 500 (SPY) lost 0.2% on the day.
The Nasdaq (QQQ) lost 0.1% while the Russell 2000 (IWM) closed the week with a gain of 0.22% on Friday.
For the week, the Dow Jones Industrial Average (DIA) lost 0.3%, the SP500 (SPY) slipped 0.1% and the Nasdaq (QQQ) gained 0.5%.
h3 On My Stock Market Radar/h3After a quick recovery from January’s losses, the Dow Jones Industrial Average (DIA) and other major U.S. indexes have stalled at significant resistance levels. The indexes have made repeated attempts to break higher but have failed. Failures like these can oftentimes lead to lower prices ahead as conviction wanes and buyers remain unwilling to push prices higher.
In the chart of the Dow Jones Industrial Average (DIA) we can see a clear picture of current conditions.
The index made a vertical bounce off recent lows after January’s swift correction and now has stalled near the 16,000 level and just below the closely watched 50 day moving average. Intense resistance levels near the 16,300 level lie just ahead and momentum and relative strength are flattening out.
The 50 day moving average is also turning sideways which is an early warning of weakening conditions in the index.
Friday was options expiration which added some volatility to markets on light news and a holiday shortened week.
Groupon (GRPN) was the big news maker as the company’s stock fell 22% as investors responded to earnings and outlook reports.
Other major movers were Cabot Oil and Gas (COG) down 8.2%, Shutterstock (SSTK) up 18.85% and Geeknet Inc (gknt) -16.1%.
Facebook (FB) fell 1.5% after announcing that it would pay $19 billion for Whatsapp.
In economic reports, the Empire State index fell to 4.5 for February, down from 12.5 and expected 9.0
Home builders index fell to 46 from last month’s 56 and missed expectations.
Existing home sales fell to 4.6 million, housing starts dropped to 880,000 from last month’s 1.05 million and missed expectations.
The Philadelphia Fed tumbled -6.3, widely missing expectations of 7.3 and last month’s 9.4
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Mortgage applications and China PMI slipped into contractionary territory at 48.3.
In good news, Feb Markit PMI jumped to 56.7, up from last month’s 53.7 and weekly jobless claims came in at 336,000, down from the previous week’s 339,000.
Next week brings:
Tuesday: December Case-Shiller home prices, February consumer confidence
Wednesday: January new home sales.
Thursday: weekly unemployment
Friday: Q4 GDP revision, February Chicago PMI, February University of Michigan consumer sentiment
Also on Thursday, Fed Chairman Janet Yellen goes back to the U.S. Senate for more testimony, this time before the Banking Committee in a meeting that was recently cancelled due to a snowstorm.
Bottom line: The Dow Jones Industrial Average (DIA) and other major U.S. stock indexes stall at resistance levels after the recent powerful run up from the January lows. Economic reports continue to show weakness but stocks stay near recent highs as investors continue to “buy the dip” and believe that the Federal Reserve “has their backs.”
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