The Three Dow Averages Are Giving Bearish Messages

John Murphy

John Murphy

Chief Technical Analyst,

Editor's Note: This article was originally published in John Murphy's Market Message on Thursday, October 18th at 5:00pm ET.

My last two messages spelled out a lot of technical reasons that are bearish for the stock market, and increase the odds that the nine-year bull run is ending. Besides the heavy selling that's taken place during October, my weekend message showed a number of serious negative divergences showing up on the market's weekly and monthly charts. Yesterday's message included the Sector Rotation Model which showed that rotation into consumer staples, utilities, and healthcare stocks usually occur near the end of major bull markets. And money is rotating there. While money is flowing out of economically-sensitive groups like consumer discretionary and industrial stocks, as well as growth-oriented technology. And those are the very groups leading this month's stock retreat. We can also see that negative rotation taking place within the three Dow Averages. Chart 1 shows the Dow Jones Industrial Average continuing to threaten its 200-day average. That's a very important test. The bigger problem lies with the Dow Transports which have already fallen below their 200-day line (see Chart 2).

Chart 1

Chart 2

John Murphy
About the author: is the Chief Technical Analyst at, a renowned author in the investment field and a former technical analyst for CNBC, and is considered the father of inter-market technical analysis. With over 40 years of market experience, he is the author of numerous popular works including “Technical Analysis of the Financial Markets” and “Trading with Intermarket Analysis”. Before joining StockCharts, John was the technical analyst for CNBC-TV for seven years on the popular show Tech Talk, and has authored three best-selling books on the subject: Technical Analysis of the Financial Markets, Trading with Intermarket Analysis and The Visual Investor. Learn More