Courtesy of John Nyaradi.
Dow Jones Industrial Average drops 1.2% for week as political squabbles continue
Charles Dow
The Dow Jones Industrial Average (NYSEARCA:DIA) managed to reclaim the psychologically important 15,000 level on Friday but dropped 1.2% on the week as investors worried about the political deadlock in Washington.
The S&P 500 (NYSEARCA:SPY) also gained on Friday but shed 0.1% for the week.
The Nasdaq Composite (NYSEARCA:QQQ) went the opposite way with a gain of 0.7% while the Russell 2000 (NYSEARCA:IWM) gained 0.4% from the previous Friday’s close.
Gold (NYSEARCA:GLD) dropped 2.2% for the week to settle at $1311/oz. on Friday.
Oil (NYSEARCA:USO) gained 0.8% to close at $103/bbl.
On My Stock Market Radar
In the chart of the Dow Jones Industrial Average (NYSEARCA:DIA) we can see that relative strength and momentum are declining, as represented by RSI and MACD in the upper panels.
chart courtesy of StockCharts.com
The index has put in a double top at the 15, 700 level and the price trend is down. The Dow Jones Industrial Average (NYSEARCA:DIA) has also broken its 50 day moving average which also is starting a downtrend.
Significant support rests at 14,800 and the 200 day moving average at 14,704.
Should those levels be broken, a reasonable target would be the 13,800 level, approximately 8% below current levels and 12% below recent highs.
During the last debt ceiling debate and the downgrade of the U.S. credit rating in 2011, the Dow Jones Industrial Average (NYSEARCA:DIA) and S&P 500 (NYSEARCA:SPY) both fell approximately 20% and some analysts forecast the possibility of a similar move over the next two weeks as the debt ceiling limit of October 17th approaches.
Should that occur, the downside target for the Dow Jones Industrial Average (NYSEARCA:DIA) would be in the region near 12, 560, 16% below current levels and 20% below recent highs.
Stock Market News You Can Really Use
All the stock market action last week was driven by news headlines from Washington as Republicans and Democrats bickered over the government shutdown as the shutdown entered its 5th day on Saturday. The deadlock shows no sign of easing as the clock ticks towards October 17th, and now it looks increasingly likely that the two debates, the budget and debt ceiling, will be merged into one as the mid month deadline approaches.
President Obama cancelled his trip to Asia to focus on the deadlock and no one expects the dispute to result in a default by the United States. However, the uncertainty over the next two weeks is likely to lead to extreme volatility in equity and bond markets.
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