Sometimes a chart speaks volumes.
Long-time readers know that I prefer the indicators to chart patterns in the indexes. I also prefer when we see a well-watched level break. Breaking a well watched level can cause panic and panic can create an opportunity.
With that in mind, I offer you the chart of the Dow. Yes, I know the Dow is an ancient index. I know no one much cares about it. In fact, I saw so many complaining in July and August when the Dow was getting all the love and everything else was sitting there like wall flowers. Yet the Dow, unlike the other major big-cap indexes, did not make a new high last week, which no one seems to have noticed. And now look at that uptrend line.
It's not as though breaking that uptrend line means there is no support down below, because there is. Heck, the Dow was this price in May, so it really hasn't gone anywhere for months. But my basic thesis on trendlines is two points make a line and the third confirms it. The more points on the line, the better the line. This has six touches and goes back to February, which means to me it is a good line.
So what will it mean if it breaks? It's a change. And I pay attention to changes. For example, the S&P has now been red for three straight days. Oh no big deal, because it's not even 1% off the high, but it hasn't done three-straight red days since mid-July. If it opts to go red on Thursday that would make it four, which is something it hasn't done since June. To me that would mean the pattern of the summer has changed.
Another pattern I have touched on lately is the relationship interest rates have to growth stocks and banks. Remember when it was almost one for one. If rates went up growth stocks went down and vice-versa. Or if rates went up bank stocks got some love. Well that relationship has not been in play for a few weeks now.
On Tuesday rates went up and growth stocks went up. On Wednesday rates went down and growth stocks went down. Perhaps folks are searching in the dark for a new narrative, but whatever it is, the pattern is shifting, albeit in a very small manner.
Away from all of that let's talk about gold. No one even asks about it anymore. No one talks about it. Instead it's non-stop crypto. Oh, I get it, crypto is much more exciting than that boring yellow metal. Yet the Daily Sentiment Index (DSI) for gold is now at 13. One more down day and we might get it to single digits.
Not only that, but if we got a bit more downside, maybe we'd see folks talk about it. But more than that, maybe we would see the right shoulder of a head-and-shoulders bottom form.