The Dow Had A Bearish Signal Last Week, And That Signal Has Only Intensified

VantagePoint Trading Software is a forecasting tool that uses both end of day data and artificial intelligence to provide traders a forecast of market movement. These forecasts are 1-3 days in advance and help traders improve their timing on making trades and maximizing profit potential. The artificial intelligence software forecasts market movement for stocks, futures, forex, ETFs and cryptocurrencies. 

This past Monday was one for the record books, and will be a day many traders remember for a while. The insane volatility seen earlier in the week often makes it difficult to trade individual equities, save for the most liquid underlying securities. Even with a sufficiently liquid underlying, the increased volatility can sometimes throw technical support and resistance levels out the window. 

So instead of focusing on an individual stock, this week's trading journal will focus on an ETF that tracks the Dow Jones Industrial Average: The SPDR Dow Jones Industrial Average ETF DIA.

The VantagePoint Trading Journal On The Dow Jones ETF

Let’s look at a three-month chart of the fund. The black line is a simple 10-day moving average. The blue line is a predicted moving average that predicts where the moving average will be in two days.

Using the predictive indicators embedded within VantagePoint and its predictive AI technology, we will point out two significant things. Notice how the two moving averages crossed over on January 31. That indicates the beginning of a bearish trend. The green-red bar at the bottom is a Neural Index that predicts strength and weakness over the next 48 hours. The simultaneous shift to red indicates near-term weakness. 

Of course, the fund is down 7 percent in the seven trading days since this bearish signal. And Monday saw the biggest point drop in the Dow's history (the index fell 8 percent on that day alone). 

As of this writing, the two moving average lines have only diverged further, indicating the bearish trend is intact (even though the Neural Index's shift to green indicates temporary strength). As long as those lines do not cross, expect weakness in the index and the funds that track it. 

This will be something to watch closely in the coming days and weeks, as the Dow Jones has broad implications for the overall market. 

VantagePoint is an editorial partner of Benzinga. For a free demo of the platform, click here.