Saturday , 20 October 2018

SPX and DJIA Approaching Crucial Support Levels

…Since February 1st, markets [have] experienced a rather volatile period and it was no exception for both the S&P 500 (SPX) and the Dow Jones Industrial Average (DJIA). Our article today will look into why both…are down and most important[ly], what are the crucial support levels investors should watch for.

The original article has been edited here for length (…) and clarity ([ ]) by munKNEE.com – A Site For Sore Eyes & Inquisitive Minds – to provide a fast & easy read.

SPX and DJIA Down, what triggered the drop?

Stocks had a strong start in 2018, and just as investors were getting more and more complacent,…[the] first market correction hit in a quick and unexpected way. In retrospect, complacency best describes the sentiment in the market towards the end of 2017 and the start of 2018. Back then…it seemed like it was impossible for the rally in the American markets to stop let alone a correction to happen yet the market correction happened…

  • As markets started recovering, the market took, again, another abrupt turn. Financial news was quick to point out the rising yield as the main factor that spooked investors.
  • Later on, they pointed towards the announcement of  Trump tariffs on imported steel and aluminium.
  • A few days ago, the fear in the market was driven by concerns over a potential trade war with China whom vowed to slap the equivalent tariff on US exports.

SPX and DJIA: The real story is in the charts

…Our InvestingHaven research team, however, firmly believes that the most valuable information can be retrieved from charts rather than news.

  • The daily Dow Jones Industrial Average (DJIA) line chart below shows that the DJIA index is going towards the thin support zone of 23160 – 23550 for sure within the next 2 weeks. We feel that this thin zone has a large chance of being pierced…
  • Our research team, however, is more concerned with the significant support zone of 21210 – 22240 (±). Should the blue zone break lower, the penultimate zone lies in the 18050 – 18700 as this is also the former resistance turned support. It is also a major pre-Trump support zone…

Similarly, as seen in the chart below, the same behavior can be observed in the SPX. The thin zone of 2560 – 2590 looks vulnerable for the next 2 weeks. 2380 – 2480 will be the critical support zone and this support is breached, the next most important support zone will be 2130 – 2185.

 

Through volatility the most important action is to remain calm to be able to make sound decisions. This will be particularly hard for those who bought at the top. Please discuss with your financial adviser and brokers for more money management and risk mitigation during time of high volatility.

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