Dow Jones Industrial Average (.DJI) Flight to Safety Dings Stocks
It was a miserable end to the week for equities as investors ditched riskier assets for safe-haven fare, such as the dollar and gold. Yes, that’s correct. Despite the U.S. Dollar Index popping today, dollar-denominated gold closed at multi-year highs while stocks tumbled.
Covid-19 concerns were again at the center of the broader market decline, but as was noted yesterday, markets are getting wise to the fact that this issue isn’t confined to China — or Asia for that matter — and data are confirming as much.
Earlier today, the IHS Markit purchasing managers’ index for February checked in at 49.6, a decline of 3.7 points from January and good for the worst reading in more than six years.
Coke And Coronavirus
Before jumping into Friday’s tech wreck, let’s have a look at Dow component Coca-Cola Company (NYSE:KO). The defensive stock was up about half a percent in late trading, but investors may do well to not be deceived here.
The company became the latest to warn that the novel coronavirus will affect its earnings, warning of a modest impact to first-quarter results. Fortunately, the soft drink giant said it still expects to earn $2.25 a share this year.
That’s likely the reason why Coca-Cola traded higher today. That and its status as a defensive name. Including Coca-Cola, three of the Dow’s four consumer staples residents were in the green today.
Bottom Line on the Dow Jones Today
Beyond the coronavirus, there’s another issue that could act as a headwind for stocks: they’re getting expensive as John Butters of FactSet points out.
“The forward 12-month P/E ratio of 19.0 on February 19 was above the four most recent historical averages for the S&P 500: five-year (16.7), 10-year (14.9), 15-year (14.6), and 20-year (15.5),” said Butters in a note. “In fact, this marked the first time the forward 12- month P/E had been equal to (or above) 19.0 since May 23, 2002 (19.1).”
Of course, equities can get pricey and continue climbing, but a more sanguine environment than one riddled by fatal illnesses is probably necessary for that to happen.
Overall, the bias in prices is: Upwards.
By the way, prices are vulnerable to a correction towards 28,513.95.
The projected upper bound is: 29,598.68.
The projected lower bound is: 28,429.46.
The projected closing price is: 29,014.07.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 3 white candles and 7 black candles for a net of 4 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 37.0035. This is not an overbought or oversold reading. The last signal was a sell 3 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 48.92. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 22 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -60. This is not a topping or bottoming area. The last signal was a sell 5 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 0 period(s) ago.
Rex Takasugi – TD Profile
DJ INDU AVERG closed down -227.570 at 28,992.410. Volume was 18% above average (neutral) and Bollinger Bands were 28% wider than normal.
Open High Low Close Volume___
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 29,282.11 28,802.96 27,213.81
Volatility: 11 13 15
Volume: 273,894,656 280,533,184 265,832,192
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
DJ INDU AVERG is currently 6.5% above its 200-period moving average and is in an upward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of .DJI at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on .DJI and have had this outlook for the last 7 periods.
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