Dow Jones, Small Caps dive into coronavirus data; Will Dow Jones test this technical level?

A sharp rise in new cases of coronavirus in the Golden State helped trigger a further liquidation in the stock market today. But stocks cut some losses in the closing minutes of the trade. Small caps marked the decline At around 3:45 pm ET, the Russell 2000 fell nearly 3%, while the Dow Jones Industrial Average fell 2.4%.


At the session low of 25,296, the Dow industrials of 30 stocks have now fallen 2.284 points from a short-term peak of June 8. But the Dow Jones also has a small air bag above its growing 50-day moving average.

In general, the stock market shows a healthy action when both the main growth stocks and the main equity averages remain above their respective 50-day lines and even carry them higher. But before Wednesday, the Dow Jones had been gaining resistance at its 200-day moving average in recent days.

In late afternoon trading, the Nasdaq trimmed losses from 2.9% in the session to less than 2%. The S&P 500 fell 2.3%. Volume had been rising higher than Tuesday at the same time on the Nasdaq, but is fading. NYSE turnover is heating up. Meanwhile, the volatility of the options showed a remarkable jump.

The Cboe volatility index rose nearly 10% to 34.46, breaking a two-day decline.

See this new investor corner in this important indicator of the psychology of the market.

These actions fall harder

Boeing (BA) helped lead the decline among the 30 Dow Jones industrials, dropping more than 10 points, or 5%. Shares in the embattled jet maker still show a nearly 19% gain for the quarter. But Boeing is still more than 50% below its 52-week high, and is therefore not close to crossing a suitable IBD-style buying point.

In contrast, the military equipment supplier still faces a large potential supply burden.

Other Dow Jones stocks that feel significant selling pressure include UnitedHealth Group (UNH) Goldman Sachs (GS) and Walt disney (DIS), as nine of the 30 Dow Jones stocks fell 4 points or more.

Nike (NKE), also part of Dow Industrials, limited its losses to around 2 points, or 1.9%. The footwear and sportswear giant reports results for the fourth quarter of May on Thursday. Street earnings fell 85% in the May quarter from a year earlier at 9 cents a share. A bullish call option is discussed in the latest IBD Earnings Preview feature.

Press reports said California saw a jump of 6,652 new known cases of Covid-19 on Tuesday. Aggressive and early orders to stay at home in major cities like San Francisco and Los Angeles have helped keep the death toll moderate compared to hotspots on the Atlantic side.

Meanwhile, the White House is reportedly considering new tariffs worth billions of dollars on goods imported from key European countries such as Germany, the United Kingdom, France and Spain.

Beyond Dow Jones: Inside FFTY and IBD Big Cap 20

Innovator IBD 50 (FFTY), due to a break after running in seven of the last eight sessions, fell almost 3%.

But the growth-focused exchange-traded fund is maintaining a positive social distance above its 50-day upward moving average.

FFTY, due to the different weights between the shares in IBD 50, does not accurately reflect the price weighted performance of IBD 50. The latter ended Tuesday’s trade at 15.4% versus a 3.1% decline for the S&P 500, excluding dividends.

Paycom Software (PAYC), which was featured in a recent Inside IBD Big Cap 20 column, reflected a large dose of profit-taking in the business software sector. Shares fell more than 5.5%. But the volume was running nearly 28% below its 50-day average rate.

According to IBD Stock Checkup, the Oklahoma City-based company has a composite rating of 99 on a scale of 1 (unfortunate) to 99 (pristine). The rating combines fundamental, technical and fund sponsorship factors. It helps IBD readers quickly select the main actions that can establish a new point of purchase.

In other words, the composite rating is not designed to act as an indicator of a timely sale.


IBD Live noted on Wednesday that several companies tested institutional buying support on the 10-week moving average. They include Masimo (MASI), Tandem diabetes (TNDM), MasterCard (May Advanced micro devices (AMD)

A sharp drop through the 10-week moving average in whale-like volume triggers a key defensive selling rule after a solid break from a good base offers a solid price run.

On the other hand, a strong bounce from the 10-week line, or the 50-day moving average on a daily chart, could offer investors the opportunity to add stocks to a winning central position or start a new share.

The best time to do this? As long as the market is in a confirmed bullish trend.

Follow Chung on Twitter at @SaitoChung and @IBD_DChung for more information on growth stocks, buy points, breaks, sell rules, and market insights.


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