Market Extra: The Dow takes ‘important first step’ toward a new bull market

by | Jan 8, 2023 | Stock Market

Don’t dis the Dow Jones Industrial Average just because it’s made up of only 30 stocks, because if the stock market bounces back from last year’s selloff, it’ll be the Dow that leads it. With the Dow
DJIA,
+2.13%
surging 700.53 points, or 2.1%, to 33,630.61 on Friday, in the wake of upbeat jobs data, it climbed back above the 50-day moving average (DMA), which extended to 33,346.77, according to FactSet data. The 50-DMA is a widely watched short-term trend tracker, being above it implies a bullish outlook for the near term.

And back on Dec. 14, the Dow’s 50-DMA crossed above the 200-DMA (32,420.79) to produce a bullish technical pattern known as a “golden cross.” Since the 200-DMA is viewed by many as a dividing line between longer-term uptrends and downtrends, a golden cross is seen as marking the spot a shorter-term bounce flips to a longer-term uptrend.

FactSet, MarketWatch

In addition, the Dow’s chart is showing a “minor breakout” above the bear-market downtrend line that started in early 2022, as pointed out by Dan Wantrobski, technical strategist at Janney Montgomery Scott.

FactSet, MarketWatch

Basically, the Dow is acting like it’s already started a new bullish uptrend. “Though this in no way confirms a new bull market is at hand, it is an important first step in climbing out of the correction/basing cycle that stocks have been locked in for the past several months,” Wantrobski wrote in a recent note to clients. The Dow has run up 17.1% since closing at about a two-year low of 28,725.51 on Sept. 30, 2022, which puts it in correction territory off the 2022 bear market. It would take a rally of 20% or more off that low, to at least 34,470.61, for Wall Street to stamp a new bull market on the Dow. The Dow’s bullish stance is in stark contrast to the technical outlooks for the S&P 500
SPX,
+2.28%
index, the technology-heavy Nasdaq-100 Index
NDX,
+2.78%
and the Nasdaq Composite Index
COMP,
+2.56%,
which all remain locked within bearish chart patterns. The S&P 500, which climbed 2.3% to 3,895.08 on Friday. It’s got close to climbing back above …

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