Dow Jones Confirms Death Cross and Falls Heavily

By Dale Gillham | Published 28 October 2019

Analysts in the US are currently speculating on whether the Dow Jones Index will confirm a death cross, which is a technical chart pattern that indicates there is potential for the stock market to fall heavily. A death crossover appears on a chart when a short-term moving average crosses below a long term moving average, which is typically confirmed when a 50 day moving average crosses below the 200 day moving average.

Right now, analysts are speculating when this might occur as the distance between the 50 day and 200 day moving averages has moved closer. The last death crossover to appear on the Dow Jones Index occurred around 18 December 2018, after which the Dow fell around 14 percent. Prior to this period, it occurred on 18 December 2015 with the Dow falling around 12 percent after confirmation of the death cross. If we see a repeat of this, then the Dow Jones is likely to fall to around 24,000 points or just below this point.

So, should you be concerned? Not really, I personally pay almost no attention to the death cross because if you wait for this indicator to confirm, then you have missed a lot of other signals that would indicate the market is falling. And it is highly likely that you have missed the opportunity to exit early from any investments you may hold. It is common to see the 50 and 200 day moving average fluctuate, therefore, right now I see no reason to be concerned about the Dow Jones.

In the latest stock market news, there was a surprise announcement last week that Microsoft were awarded the $10 billion ten-year Jedi cloud contract with the Department of Defense. In what was considered a forgone conclusion, Microsoft came from behind to beat Amazon web services for the deal. Given that Amazon is the largest player in the cloud space, the market expected Amazon to close the deal. So it will be interesting to see what happens with the stock price of both companies when the market opens on Monday.

So far reporting season has seen no real surprises, although Intel has beaten analyst expectations and, as a result, was up 9.93 percent last week. I have been watching the semiconductor space for a while and in addition to Intel I also like Nvidia which was up 7.38 percent last week, while Qualcom was up 3.21 percent, AMD was up 5.62 percent and Broadcom was up 1.08 percent.

While vehicle sales were down for September, Tesla surprised the market with a quarterly profit, resulting in the stock’s strong performance last week given that it jumped over 27 percent. Ford also reported, and despite reporting acceptable results for the quarter, it did not stop the stock from falling as it closed down 6.14 percent for the week and looks likely to continue its downward slide. Caterpillar, on the other hand, had disappointing second quarter results, while Amazons results were mixed.

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