DOW INDUSTRIALS TEST THEIR 200-DAY LINE -- BANKS FALL BELOW THEIR RED LINE BUT ARE TESTING SUPPORT -- SMALL CAPS AND TRANSPORTS DO THE SAME -- VIX INDEX IS TESTING ITS MAY HIGH
DOW TESTS 200-DAY AVERAGE...Chart 1 shows the Dow Industrials testing their 200-day moving average (red line). The 14-day RSI line has dipped below 30 signalling a short-term oversold condition. That's the first important test of support for the Dow.
BANKS HAVE A BAD DAY...Falling bond yields continue to take a toll on bank stocks. Chart 2 shows the KBW Bank Index falling further below its 200-day moving average. It's now testing a potential support line drawn under its 2019 lows.
SMALL CAPS ALSO FALL BELOW 200-DAY LINE...Chart 3 shows the Russell 2000 Small Cap Index also falling below its 200-day moving average. But just above potential support at its spring low.
TRANSPORTS TOO...Chart 4 shows the Dow Transports also falling below their 200-day average. But remaining above their late-May/early-June low. Weakness in transports isn't a good sign for the market. Which is why it needs to hold above its 2019 lows. The same is true of banks and small cap stocks.
VIX TESTS ITS MAY HIGH...Chart 5 shows the CBOE Volatility (VIX) Index testing its May peak. That's an important test. A move above that previous peak would signal higher volatility; which usually coincides with lower stock prices.
