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Dow Industrials support convincingly broken

(April 15, 2002)

The Dow Industrials traded down 97.15 points today, for a new two-month low of 10,093.67. We are now less than 100 points from the psychological 10,000 number, a number which we first surpassed exactly three years ago. Since then, the Dow has essentially gone nowhere and the less-than 2% dividend yield hasn't added too much appeal to it either.

Another session similar to today's session would have us below 10,000 after the close tomorrow. Immediately below that is the 200 DMA, which currently stands at 9.960.

With today's close, however, the Dow Industrials has already broken two key support levels pretty convincingly. Let's take a look at the chart:

Current and Key Support Level of the Dow Jones Industrials (September 2001 to Present)

Both the up trend line from late September 2001 and the 50 DMA has been clearly violated on a closing basis. Furthermore, if the Dow Industrials dips below 10,000 soon and stays there, the 50 DMA would have topped and would start turning down during the early to middle part of next week. If this happens, it would be a very bearish development! The current situation does no bode well for the bulls.

Prior to today's session, we were doubting the bear case mainly because the Dow Transports made both a higher low and a higher high last week. This bearish stance of ours changed today, with the Dow Transports getting hit for 72.38 points and settling at 2,802.65 today. The Dow Transports is below its 50 DMA of 2,826.44, once again.

Technically, we just could not find anything that will change our current bearish stance on the market. If the market fails to accelerate to the downside from here, that may change, but for now, we maintain a bearish posture on the stock market in general.

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