The SPDR Dow Jones Industrial Average (DIA) ETF has pulled back in the past few days as a sense of fear spreads in the market. It has formed a double-top chart pattern, pointing to further downside as the fear and greed index moves to the extreme fear zone. The blue-chip ETF was trading at $436 on Tuesday, down from the year-to-date high of $450.
DIA ETF crashes as the fear and greed index falls
The DIA ETF is at a significant risk as the fear and greed index, which is tracked by CNN Money moves to the extreme fear zone of 23.
Most of its sub-indices are in the extreme fear zone. For example, the market momentum, which looks at the S&P 500 index in relation to the 125-day moving average has tilted downwards in the past few days.
The stock price strength, which looks at the number of new 52-week highs or lows on the NYSE has moved to the extreme fear point. Put and call options ratio and safe haven demand are in the extreme fear region, while junk bond demand and stock price breadth are in the fear region.
The Dow Jones and other American indices tend to drop sharply when there is a sense of fear in the market since many investors sell and others remain in the sidelines.
Most of this fear is because of Donald Trump’s policies on trade. He has restarted his trade war with other countries by placing huge tariffs on them. These tariffs will hurt all companies in the Dow Jones index.
Salesforce and NVIDIA earnings
The next potential risk or catalyst for the Dow Jones index is the upcoming Salesforce and NVIDIA earnings. These numbers are notable since they are the some of the biggest components in the fund.
NVIDIA earnings will have the biggest catalyst because of the importance of its business since it is the biggest manufacturer of chips that are widely used in the artificial intelligence industry. Its chips are widely used by companies like Microsoft and Google to train their AI models.
The average estimate is that NVIDIA’s revenues rose by 72% in the fourth quarter to $38.16 billion, bringing the annual figure to $129 billion. A strong NVIDIA report and guidance will be a good thing for the Dow Jones index and its DIA ETF.
The other big company that will publish its numbers is Salesforce. Analysts anticipate that its revenue figure will be $10.04 billion, a 8% jump from a year earlier. Its annual revenue will be $37.8 billion, higher than the $34.8 billion it made last year. CRM stock is the worst-performer in the DIA ETF this year as it crashed by 8.5%. NVIDIA stock has also fallen by 5.7% this year.
The other top laggards in the fund are Merck, UnitedHealth Group, Honeywell, Caterpillar, and Microsoft. On the other hand, the top gainers in the fund are Amgen, IBM, Johnson & Johnson, Coca-Cola, and 3M.
DIA ETF stock analysis
The daily chart shows that the DIA ETF stock has come under pressure in the past few days and is at risk of more downside. It has crashed from a high of $450 to the current $436. It formed a double-top pattern whose neckline is at $418. A double-top is a highly risky company.
The MACD and other oscillators have all pointed downwards. Therefore, the Dow Jones ETF will likely continue falling as bears target the next key support level at $418, the neckline of the double-top pattern and the 23.6% retracement point. A drop below that level will point to more downside, potentially to the 50% retracement level at $382.
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