PLUNGE IN CITIGROUP AND GE PUSH DOW BELOW 50-DAY AVERAGE -- MACD LINES WEAKEN FOR THE NASDAQ AND THE S&P 500

DOW BREAKS 50-DAY LINE ... The Dow is the first of the major stock indexes to break its 50-day moving average. If that pattern continues through the balance of the day, it would be the first legitimate sell signal since last October. Although the Nasdaq and the S&P 500 are still trading above that important support line, their short-term patterns are turning negative as well. Chart 2 shows the daily MACD lines for the S&P turning negative after failing to confirm the recent price move to a new high. The same is true for the Nasdaq Composite. The daily MACD histogram bars for the Nasdaq in Chart 3 have fallen below the zero line. That's another way of saying that the MACD lines have turned negative. Unless the market stages a comeback before the day is out, the short-term chart picture will look a lot weaker than it did this time last week. A spike in energy prices is rattling the market -- as is selling in the semiconductor group. Semiconductor Holders (SMH) are once again threatening their 50-day line (Chart 4). Chart 5 shows the Bank Index having broken that support line. The two biggest Dow culprits are Citigroup and GE.

Chart 1

Chart 2

Chart 3

Chart 4

Chart 5

CITIGROUP AND GE TUMBLE ON HEAVY VOLUME ... After the price plunge in Intel earlier this week, it's very disconcerting to see two other Dow stocks tumble so badly today. Citigroup and General Electric are plunging on very heavy volume as shown in the next two charts. There's no way to put a positive spin on that terrible chart action. While Citigroup is threatening its 200-day average, GE has already broken that long-term support line. Late last week I recommended some initial profit-taking in the market as a whole. Today's action makes me think it's time to do a little more selling.

Chart 6

Chart 7