Dow Jones And XLF: A Test Of New Lows

File this under “In Case You Missed It.”  The XLF Financial SPDR ETF (XLF) closed at all-time lows today, while the Dow Jones (^DJI) closed on its November 2008 closing low, which is now a mere 102 points away from shattering the November lows, which would be a six-year low in the Index.  Let’s take a quick look at these developments.

Dow Jones Index (Daily):

It seems almost common sense now that prices were destined to challenge the November lows to see if bulls can put in a bottom… or if they will lose that final line in the sand as well.  With the index only 100 points away from this critical level, a test (revisit) seems almost inevitable now.  Whether or not the buyers hold this level will serve as a critical marker as to whether this is the bottom (the TV Media seems to want it to be) or not (as Elliott Wave and many other forms of analysis including basic trend assessment) seem to be hinting to us).

Just like the S&P 500 (^GSPC), the 3/10 Momentum Oscillator is currently unable (or unwilling) to give us any clues as to what’s about to happen, though if we do manage to make a marginal new low here, it would perhaps set up a large-scale, triple swing positive momentum divergence… but that’s just wishful thinking at the moment.

If the argument “The Financials Lead the Market” is true, then we are certain to break and exceed these lows.  Let’s turn now to see the XLF making a fresh low today… which damages the bullish argument.

XLF Financial SPDR ETF:

You’ll need to look closely, but in January, the XLF broke the November lows (perhaps ahead of the market) and today, the XLF broke the January lows, setting in an all-time closing low of $7.97 today.

Price is beneath all three key daily (and weekly) moving averages, and they are all in the most bearish orientation possible.  Price recently failed a test of the falling 20 EMA.

The 3/10 Oscillator has clearly set-up a three-swing positive momentum divergence, but that means very little in such overwhelming trend conditions.

Keep watching these developments - it’s possible we see some majorly volatile (expanding) price action soon… and it looks like it could be to the downside now that 800 is broken on the S&P 500 and the Dow Jones is so close to breaking fresh lows.  There are likely a lot of stop-loss orders beneath these important levels.

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